Forex Trading

NSE to Host Exclusive Pre-Open Trading Session for RIL on July 20 Following Jio Financial’s Temporary Inclusion in Nifty 50 Index

On July 20, the National Stock Exchange of India will organize a special pre-open session specifically for Reliance Industries (RIL) stock. This special session is being conducted in light of the demerger of RIL’s financial services business. RIL has set July 20 as the record date, which will be used to identify eligible shareholders for the distribution of shares in the demerged entity.

According to the demerger plan, shareholders of RIL will receive one share of the demerged entity, Reliance Strategic Investments, for every share they currently hold in the conglomerate. This means that existing RIL shareholders will be entitled to receive one share in Reliance Strategic Investments for each share they own in RIL.

The purpose of this demerger is to separate RIL’s financial services business into a distinct entity, allowing it to operate independently. The pre-open session on July 20 will facilitate the trading and valuation of RIL shares in light of this significant corporate event.

Following the demerger, the demerged entity, which was previously known as Reliance Strategic Investments, will be renamed as Jio Financial Services. This new entity will be listed on the stock exchanges, and the process of listing will take some time to be completed.

During this transitional period, Jio Financial Services will be included in various indices managed by NSE Indices. Along with being added to the Nifty 50 index, it will also be temporarily included in 18 other indices, including Nifty 100, Nifty 200, Nifty 500, Nifty Energy, and Nifty Oil & Gas.

The temporary inclusion of Jio Financial Services in these indices is a procedural step to reflect its significance and ensure continuity in the representation of the conglomerate’s operations within the broader market indices. Once the official listing process is completed, Jio Financial Services will be removed from the temporary inclusion and will have its own dedicated listing on the stock exchanges.

This change in the indices is in alignment with the evolving corporate structure of the company, allowing investors to track and analyze the performance of Jio Financial Services as a separate entity.

Under the new regulations, when a demerged or spun-off entity of an index constituent is included in the index, it will be assigned a constant price. This constant price is calculated as the difference between the demerged company’s closing price on the day prior to the ex-demerger date (referred to as T-1 day) and the price determined during the special pre-open session.

On the T-1 day, after the market closes, the exchange will create a dummy symbol representing the demerged entity. This dummy symbol will be added to the respective index, reflecting the upcoming inclusion of the demerged entity.

On the ex-demerger date (referred to as T day), a special pre-open session will take place. During this session, the market will determine the price of the demerged entity based on trading activity and investor sentiment. This price will be used in conjunction with the closing price on the T-1 day to calculate the constant price for the demerged entity.

By assigning a constant price to the demerged entity, the index ensures that the inclusion of the new entity does not disrupt the overall index value or introduce artificial volatility. This mechanism allows for a smooth transition and accurate representation of the constituent companies within the index.

(Disclaimer: The recommendations, suggestions, views, and opinions expressed by experts are their own and do not necessarily reflect the views of Babaji Academy.)

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