Index funds could sell 150 million shares of Jio Financial Services after listing

Mukesh Ambani, Chairman, Reliance Industries

Domestic passive funds could sell around 150 million shares of Jio Financial Services, three days after its listing, as per the calculation done by Nuvama Alternative & Quantitative Research.

After the special pre-open session conducted by exchanges on July 20, the discovered price for Jio Financial Services was Rs 261.85, while RIL settled at Rs 2,589 a share.

As communicated by exchanges, JFS will remain in the index at this constant price till the listing date is announced by the company. It will be removed from the index, three days after listing.

Also Read: Jio Financial demerger: Discovered price much higher than street estimates

"At Rs 261.8 per share, Nifty 50 index passive trackers could sell around 90 million shares which is equivalent to ~$290 million. Alongside Sensex index trackers could sell 55 million shares worth $175 million. This is assuming weightages of less than 1 percent in Nifty 50 and around 1 percent in Sensex, at the current free float," said Abhilash Pagaria, Head - Nuvama Alternative & Quantitative Research.

These are mostly ballpark calculations as JFS weightage is bound to change with the price movement of other constituents in the index.

Three days after listing, JFS will be removed from the indices, consequently from index funds and its weightage will be distributed among other stocks. So, JFS share price will see some volatility on that day while few other Nifty 50 stocks will see inflows.

Meanwhile, Reliance Industries weight in Nifty 50 index will now move to around 10.1 percent versus ~11 percent as on July 19. In Sensex, it will move to around 11.8 percent from 12.8 percent pre-demerger.

Also Read: Jio Financial Services investors sitting on 100% capital gain after price discovery

Tentative listing date

Since Jio Financial Services is being carved out from one of the biggest giants, Nuvama expects the listing process to be fast-tracked.

"It is quite likely JFSL may be listed in a month’s time (or even lesser)," Pagaria said.

In recent instances, Piramal Pharma listed after 45days of demerging from Piramal Enterprises. On the other hand, NMDC Steel listed 4 months after spin off.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.