Shares of Jio Financial Services Ltd hit the 5 percent lower circuit for the third session on August 23. At 11am, the stock was trading at Rs 227.25 on the BSE, down 5 percent from its previous close.
Players tracking the stock said the decline could have more to do with technical factors than fundamental ones.
They said passive funds such as index funds and exchange traded funds benchmarked to the Nifty and Sensex could be selling the stock as their mandate is to only invest in stocks that are part of the indices. Since the stock will not be part of the Sensex and Nifty from August 29, the funds could be pre-empting the move, rather than waiting till the last moment.
Jio Financial will continue to be a constituent of MSCI and FTSE indices. There won't be any fresh buying or selling, Nuvama's Abhilash Pagaria noted.
The stock lost around 13.2 percent in the last three sessions. The company went listed on exchanges on August 21. A special pre-open session was held on July 21 for the demerged entity, determining a stock price of Rs 261.85 and an implied market capitalization of Rs 1.65 lakh crore.
Earlier, stock exchanges had postponed the exclusion of Jio Financial Services from key Sensex and Nifty indices to August 28 from August 23.
As passive funds adjust their portfolios, the combined outflow will approximately be 145-150 million shares, for both Nifty and Sensex, said a note by Nuvama Alternative & Quantitative Research.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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