The situation with Jio Financial Services (JFSL) shares and their exclusion from various stock market indices, including Sensex, is indeed noteworthy. This development has raised concerns among investors and index funds.
JFSL's exclusion from these indices has been extended to August 31 due to the stock hitting the lower circuit limits for two consecutive days. This means that JFSL will be removed from all the S&P BSE Indices before the opening of trading on September 1, 2023.
The continuous lower circuit limits have led to significant selling pressure from institutional investors. Analysts estimate that around 12 crore JFSL shares need to be sold by index funds as they adjust their portfolios in response to JFSL's removal from the indices.
Deepak Shenoy, Founder and CEO of Capitalmind, explained that index funds are forced to sell JFSL shares, which amounts to approximately ₹2,700 crore worth of shares. This is because once JFSL is out of the lower circuit, it's no longer part of the index, and index funds need to exit their positions accordingly.
The situation has also affected the stock's price, with JFSL shares consistently hitting the lower circuit, causing selling pressure and a lack of buyers. This challenging scenario has led to a complex situation for both the stock and the index funds involved.
Investors and market participants will closely watch how this situation unfolds and its impact on JFSL's stock price and the broader market indices. It underscores the importance of understanding market dynamics and the implications of such exclusions from major indices.