Reliance Demerger not a cause for Nifty fall

According to the scheme of arrangement, shareholders of RIL will receive 1 share of the demerged entity, Reliance Strategic Investments, for each share they hold in the conglomerate.

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Analysts do not expect the Nifty to fall post the demerger of Reliance Strategic Investments Ltd (RSIL) and Reliance Industries Ltd (RIL). To ensure there is no significant impact on the index, RSIL will be listed as the 51st share on Nifty, with its weight adjusted accordingly. As a result, the combined weight and price of Reliance plus RSIL will remain the same as Reliance’s closing value on July 19.

The Nifty is currently trading almost flat as of 11:26 am, July 20, hovering around the 19,825 mark signifying a slip of an almost-insignifcant 0.03 percent.

Kirtan A Shah, a trader, explains on their LinkedIn profile that until 10 am, the Nifty’s actual price will be determined by considering Reliance Industries Ltd (RIL)’ closing price of July 19, along with the real-time prices of the remaining 49 stocks.

However, after 10 am, during the pre-open session, only RIL’s stock will be actively traded, while the price of RSIL will is unaffected. Consequently, any movement in RIL’s stock after 10 am will directly impact the Nifty, just like any typical trading day.

Three days later, RSIL will be removed from the index, and Reliance’s weight in the index will be adjusted back to its appropriate value. This process will be carried out for all the indices in which Reliance is a constituent, Shah added.

According to the scheme of arrangement, shareholders of RIL will receive 1 share of the demerged entity, Reliance Strategic Investments, for each share they hold in the conglomerate. However, it’s important to note that this new stock will not be tradable immediately. It will remain in the Nifty 50 index at a constant price until the listing date is officially announced. During this period, investors will not be able to trade the new stock until it is officially listed and becomes available for trading.

RSIL stock is listed at Rs 261.8 per share and Nuvama Research expects Nifty 50 Index passive trackers to potentially sell around 90 million shares, which amounts to approximately $290 million. Similarly, Sensex Index trackers could potentially sell 55 million shares, equivalent to approximately $175 million.

Also Read: Jio Financial demerger: Cost of acquisition of RIL share implied at 95.32%

As of today, July 20, RSIL is undergoing the process of being demerged from RIL. After the demerger, it will be renamed as Jio Financial Services (JFS). However, the actual listing of JFS on the stock exchanges will happen at a later date, which is yet to be announced. Investors are advised to keep an eye out for further updates regarding the listing date of JFS on the exchanges.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.