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.
As we’ve said before about Jio Financial: “JIOFIN shares being down only 4.99% is an improvement on the 5% on each of the last two days but that’s just a mathematical trick of rupees and paise. Jio Financial has actually dropped the maximum amount the circuit breakers will allow each of the three days since its IPO. This showing us one of the problems with having such circuit breakers. The entire point of our having a stock market is so that we gain price discovery. What is the price at which people are willing to buy and sell? That’s the whole game, the valuation process.”
As we say, the purpose of a stock market is that price discovery. If the market rules won’t allow price discovery then those are bad market rules.
We’ve further such complaints about JIOFIN and also here.
As we can see, JIOFIN is opening limit down and closing limit down. That’s not aiding price discovery.
Jio Financial share price from Google Finance
The real background problem here is that very large numbers of Jio shareholders don’t, in fact, want to be Jio shareholders. The demerger has meant that they’ve been issued with stock and an exposure that they don’t want. There’s also some corpus of would be shareholders out there who would be happy to own part of an Indian financial firm. The aim of a financial market is supposed to be - supposed - to find the price at which that mutually acceptable trade will take place. Price limits of course delay, even prevent, this discovery process.
We tend to agree with Chakri Lokapriya here. There’s a wave of technical selling going on here. And there should be that corresponding wave of buying too - but as the price can’t fall to where the buyers appear then the market is constipated. For if the shares are limit down today then would be buyers are calculating that they might well be limit down again tomorrow - and so on. It’s once that wave of selling has stopped that we’ll start to see a real valuation - and that could well be a rebound.
