Jio Financial Services’ (JFS) temporary inclusion in the BSE indices came to an end on Friday, with the stock removed from the Sensex and other BSE indices before start of trade.
Earlier slated to be removed three days after listing, the same was deferred on account of the stock hitting the lower circuit of 5% for three consecutive sessions. The selling pressure was largely on account of index funds trying to sell the stock.
On Friday, the stock was locked in the upper 5% circuit, closing at Rs 245.30.
Nuvama expects a smooth removal from Nifty indices once the stock is out of the T-to-T segment. JFS was included in the trade-for-trade segment for the first 10 days of listing until September 4. The outflow could amount to approximately 105 million shares, according to Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.
However, with the stock hitting the upper circuit of 5% on the NSE, removal will not take place before September 6. At the same time, the global MSCI and FTSE retain JFS in the indices, with no impact on inflow or outflow.
According to the methodology followed by Asia Index, re-inclusion of the JFS stock in the benchmark Sensex would depend on fulfilment of certain criteria and its float-adjusted market capitalisation.
According to the eligibility criteria, stocks must have been listed for at least six months, have traded on every trading day on the BSE, and also have a derivative contract.
Eligible stocks are ranked based on their average six-month float-adjusted market capitalisation and average six-month total market capitalisation.
Next, they are sorted according to the annualised traded value.
Those with a cumulative annualised traded value above 98% are excluded, with the remainder sorted by average six-month float-adjusted m-cap. Those with a weight of less than 0.5% are excluded.
The others are then ranked on their average six-month float-adjusted m-cap, and selected for index inclusion.
“Besides fulfilling the index criteria, JFS will need to have some operational history and profitability before its re-inclusion is taken up for review by the exchanges,” said Deepak Jasani, head of retail research at HDFC Securities.
Index constituents are weighted based on their float-adjusted market capitalisation.
As of Friday, JFS commanded Rs 1.55 trillion in market cap, with the free-float m-cap at Rs 82,598 crore, according to BSE data.