Before demerger, the valuation of JFS share by analysts was estimated between Rs 150-180. However, on the day of demerger, the procedure adopted for Price Discovery resulted in inflation of its value to 261. This could have been a deliberate strategy of the Institutional Investors.
Being part of Reliance Industries Ltd, JFS automatically became a part of the Index. However, it was to be removed from the Index wef 24th Aug, which date has now been extended to 29th Aug.
Since it'll not remain a part of the Index, all Index Funds and ETFs have no option but to sell this stock, as per the norms. Hence, the selling pressure, with lack of buyers, is resulting in daily Lower Circuits.
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The RIL AGM is scheduled on 28th Aug. That day you'll get some clarity on how JFS will move ahead with its business plan update. The management team gathered by Ambani has very established figures, led by KV Kamath, who plans to establish a full fledged NBFC, with Insurance, MFs, Loans and Credit departments etc. With the sizeable customer database available from Reliance Retail and Jio Telecom, JFS is also likely to get good cross-selling opportunities.
Retail investors should not panic, just wait and watch. The situation will stabilise after the initial turmoil, once the Index Funds and ETFs have sold the stock held in their portfolios.
Yes, the short term Traders need to be wary.
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