Jio Financial continues slide, likely delaying index removal

JFS shares fall 5% for 2nd day, likely delaying index removal. Analysts say removal could be postponed 3 days if stock continues to trade at lower circuit. Valuation reduced to $18B from $20B. Banks have edge on cost of funds, robust collection mechanisms.

Shares in India's Jio Financial Services (JFS) slid the maximum allowed 5% for a second straight day on Tuesday, which will likely delay their exclusion from the country's benchmark indexes.

JFS shares opened down 5% at ₹236.45 and stayed at that price. They ended 5% lower on Monday in their trading debut as funds continued to trim their holding, accumulated after JFS was spun out of billionaire Mukesh Ambani's Reliance Industries .

Since Reliance is part of the benchmark Nifty 50 and Sensex indexes, JFS was automatically included, with the plan to remove them at the end of the third trading day — which had led to the heavy sell-off in the stock since their debut.

However, the stock exchange regulators had said JFS's removal from the indexes on August 23 would be delayed if the stock hit the 5% upper or lower circuits for two days in a row.

The removal could be postponed by three days if the stock continues to trade at the lower circuit, said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research.

JFS's roughly 10% drop in the past two days has reduced its valuation to about $18 billion, from around $20 billion during a so-called "price discovery" session in mid July.

Reliance's shares have fallen about 1% in the past two sessions. JFS, which has said it intends to be a "full-service financial services player", holds a 6.1% stake in Reliance.