The share price of Jio Financial Services slid 5% on Tuesday, hitting its lower circuit for the second consecutive session due to worries about passive outflows. The financial arm carved out of Reliance Industries witnessed its stocks pegged at a 5% lower circuit restriction on its first day on the bourses, down from the discovered price of Rs 261.85.
Jio Financial Services outlook
According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the valuation of JFS largely hinges on its future growth potential and its 6.1 per cent stake in RIL. He notes that the company’s outlook is undeniably promising, given its expansive reach among consumers and merchants. However, it’s this very promise that may be leading to its current turbulence. With JFS shares placed in the T segment, institutional selling is exerting downward pressure on its price in the short term.
This sentiment is echoed by Prashanth Tapse, Sr VP Research at Mehta Equities, who pointed out that JFS’ listing was somewhat subdued compared to market expectations. Recent developments, like the news from FTSE funds, had preemptively signaled the possibility of selling pressure from ETF funds. Tapse opines that the market perceives the fair value of JFS shares to be between Rs 150-180. Its current trading price, noticeably higher than this projected value, suggests some overvaluation, leading to short-term selling pressure.
“We do not remain alarmed towards threat for existing players as we believe loan origination through existing sets of customers is important, however other factors such as cost of funds, appropriate risk assessment as well as prudent recovery mechanism also plays an important role for the success of a lender,” added InCred Equities.
Despite these near-term challenges, the bigger picture for JFS remains optimistic. The company’s diverse interests spanning consumer and merchant lending, insurance, payments, asset management, and digital broking underline its potential to carve a significant niche in the financial sector. Notably, the firm’s decision to forge a 50:50 joint venture with BlackRock, aiming to penetrate the mutual fund industry, showcases its ambitious forward trajectory.