Selling by funds spoils Jio Financial market debut

livemint.com:

Nifty and the Sensex will sell almost 150 million shares on its imminent exit from benchmark indices. However, analysts said the stock would likely turn attractive once the near-term pricing pressure abates, thanks to its ability to leverage the ₹1 trillion of net worth bestowed in the form of Reliance Industries Ltd (RIL) treasury stock that emanates from the 2002 merger of Reliance Petroleum Ltd with RIL.

The stock plunged to hit the 5% lower circuit at ₹248.9, shortly after listing at ₹262 on National Stock Exchange (NSE), a tad above its discovered price of ₹261.85 on 20 July, the date of the demerger. The listing on BSE was slightly higher, at ₹265.

But here, too, the stock hit the 5% lower circuit of ₹251.75 shortly after listing and remained frozen at that level. “I think ₹200-225 could be attractive entry points, given the company’s pedigree and financial heft, courtesy of RIL," said independent market consultant Ambareesh Baliga.

Baliga, however, said the sale by passive funds could have induced selling by high-net-worth investors and retail investors too, whose sentiments were “soured" by the institutional selling. Brokerage Nuvama estimated in a 20 July note that passive funds tracking the Nifty could sell around 90 million shares worth approximately $290 million, while passive Sensex trackers could sell around 55 million shares worth about $175 million.

“It’s probable that the selling pressure by funds could extend the downside, but a level of around ₹200 (close to the book value) would be an attractive proposition for retail investors," said the retail head of a large brokerage on condition of anonymity. The order book on NSE showed a sell quantity of 209,900 shares at ₹248.9, which found no takers at that