Jio Financial (NSE: JIOFIN) shares are up 1% and change today. That means JIOFIN shares have finally ceased their limit down day by day fall from the IPO price. That it has taken 5 days to get to this point reveals why the Indian stock exchanges have some work to do before they become considered a major part - even a reliable part - of global capitalism. The entire and whole point of having a stock market is price discovery. If that takes 5 days because of the rules of the market then that’s 5 days too long.
As background here we have of course the demerger of JIOFIN from Reliance: “Jio Financial (NSE: JIOFIN) shares are down 5% today. JIOFIN shares can’t go any lower than 5% down because of the trading limits on such new share issues. So quite where this is going to go in the days ahead is unknown as it’s simply not possible for the price discovery process to work in real time. The trading limits mean that it will take days to find the true trading range. That might all sound a bit odd - it is odd as the aim of a stock market is to find the value of a stock - but that’s the way it’s done in India. Jio Financial is a demerger from the Ambani controlled Reliance group. The Ambani’s still own 42% and at least so far have said that they intend to keep that stake.”
Well, OK, so there’s an IPO. We’d like to find out what the correct - not launching - price of that IPO is. Which is exactly what the Indian stock market doesn’t provide.
Jio Financial share price from Google Finance
It really should not take five days to find out the value of Jio Financial: “Jio Financial (NSE: JIOFIN) shares are down 5% again today. JIOFIN shares would, on any other market, be at a buy and sell balance by the fourth day of trading. Sure, we might still see some volatility but we’d at least be at a price where buyers equal sells and so on. This is something that Indian market rules are specifically and deliberately preventing from happening. This isn’t a good advertisement for those market rules.”
No doubt there will be Indian market regulators who congratulate themselves on how they’ve prevented a disorderly market with their circuit breakers and price limits. What they’ve really done is show the weakness of the Indian stock market. Yes, a market should be able to deal with a 20% move in the price of a new IPO. The fear that it can’t - that fear which leads to the restrictions - is all the evidence we need of how weak the Indian stock market actually is.