15 Crore Shares of Index Funds Set to Be Sold Following Jio Financial’s Listing
Reliance Jio Financial Services Demerger
Impact of Jio Financial Services Listing on Index Funds and RIL’s Weightage in Nifty 50 and Sensex
The special pre-open session conducted by stock exchanges on July 20 brought crucial insights into the valuation of Jio Financial Services (JFS) following the demerger from Reliance Industries (RIL).
The discovered price of JFS stock during this session was Rs 261.85, while RIL’s scrip settled at Rs 2,589. This event has significant implications for both passive index funds and RIL’s weightage in the Nifty 50 and Sensex indices.
RIL’s Weightage in Nifty 50 and Sensex
The demerger has led to a notable change in RIL’s weightage in the Nifty 50 and Sensex. As of July 19, RIL’s weightage in the Nifty 50 index was 11%.
However, after the demerger, it is expected to decrease to around 10.1%. Similarly, in the Sensex, RIL’s weightage has come down from 12.8% before the demerger to approximately 11.8%.
Impact on Passive Funds
Following the listing of Jio Financial Services, passive index funds are projected to sell around 15 crore shares of JFS within three days of its listing.
Nuvama Alternative & Quantitative Research has conducted this estimation. At the discovered price of Rs 261.85 per share, passive funds tracking the Nifty 50 index are likely to sell around 90 million shares of JFS, amounting to approximately $290 million.
Additionally, these funds may sell 55 million shares, valued at approximately $175 million. As of the current free float, JFS is expected to have a weightage of less than 1% in the Nifty 50 and about 1% in the Sensex.
The Volatility Factor
It is essential to acknowledge that these projections by Nuvama are estimates, and the weightage of Jio Financial Services in the indices may change with fluctuations in the prices of other stocks within the index.
Following the three-day listing period, JFS will be delisted from the indices, and its weightage will be redistributed among other stocks.
This redistribution is likely to cause some volatility in the shares of JFS on that specific day, while other stocks in the Nifty 50 are expected to attract investments.
Nuvama’s Optimistic Outlook
With JFS being carved out of Reliance Industries, Nuvama remains optimistic about the listing process. Abhilash Pagadia, Head of Nuwama Alternative, predicts a high probability of JFS getting listed within a month.
Previous cases, such as Piramal Pharma’s listing 45 days after its demerger (spun off from Piramal Enterprises) and NMDC Steel’s listing four months after its demerger, serve as reference points for this timeline.
Conclusion
The pre-open auction on July 20 brought insights into the valuation of Jio Financial Services following its demerger from Reliance Industries.
The subsequent listing of JFS is expected to have a notable impact on passive index funds, leading to a sell-off of shares.
Nuvama Alternative & Quantitative Research estimates that passive funds may sell around 15 crore shares of JFS. However, it is crucial to note that this is a projection, and the weightage of JFS in the indices may change due to market dynamics.
As the listing date for Jio Financial Services is anticipated, investors and market participants are closely monitoring developments.
The demerger has led to adjustments in RIL’s weightage in the Nifty 50 and Sensex, which may further influence market sentiments.
While Nuvama remains optimistic about the listing process, the actual timeline and impact will be closely watched by stakeholders in the financial markets.
