Regulatory Scrutiny Triggers Market Jitters
SEBI investigation into Jane Street sends ripples through Indian capital markets, sparking investor concern.
A probe by India’s markets regulator, SEBI, into **Jane Street**, a major trading firm, has shaken Dalal Street, leading to a significant drop in market capitalization for several key players as investors grapple with uncertainty.
Stock Plunge Follows Regulatory Action
Shares of **Nuvama Wealth Management**, a local trading partner of **Jane Street** in India, experienced the most dramatic fall, plummeting 11.26%. This occurred despite the firm not being directly implicated in SEBI’s investigation. Stock exchange BSE and Angel One also saw declines of around 6% each, while CDSL fell over 2%. The total loss in market capitalization reached nearly Rs 12,000 crore.
SEBI’s action is focused on alleged price manipulation by **Jane Street** and its affiliates in Bank Nifty index options and underlying stocks, demanding the repayment of unlawful gains amounting to Rs 4,844 crore.
Dependence on Proprietary Trading Firms Exposed
The market’s reaction to **Nuvama** highlights the interconnectedness of firms. Investors are clearly worried about potential revenue losses stemming from the possible departure of a key client. This illustrates how regulatory actions can significantly impact business partners, even those not directly accused of any wrongdoing.
According to data, high-frequency trading (HFT) accounts for a substantial portion of trading activity on Indian exchanges. For example, on the NSE, HFT order volume accounted for 63% of the total order volume in 2023 (SEBI Discussion Paper, April 2023).
“Prop trading firms like Jane Street account for nearly 50% of options trading volumes. If they pull back—which seems likely—retail activity (around 35%) could take a hit too. So this could be bad news for both exchanges and brokers.”
—Nithin Kamath, Zerodha Founder
Expert Opinions Diverge
The extent of the market’s reliance on these firms is considerable. The possible exit of such a large player introduces substantial uncertainty. It raises questions about future market liquidity and overall trading activity.
Siddarth Bhamre, Head of Institutional Research at Asit C. Mehta, stated:
“Jane Street is one of the largest traders contributing to Indian markets. When big players are banned for wrongdoing, others become cautious and reduce activity, leading to lower volumes. Traders may also face fewer counterparties, potentially causing a further drop in F&O volumes ahead.”
—Siddarth Bhamre, Head of Institutional Research at Asit C. Mehta
Ashish Nanda, President & Chief Digital Business Officer at Kotak Securities, emphasized the far-reaching effects:
“HFTs will surely be feeling the heat. Many will be re-assessing their strategies. Will they slow down? The fact is that HFT firms provide a lot of liquidity in the markets. If there’s a reduction in activity by HFTs, it will also impact retail volumes.”
—Ashish Nanda, President & Chief Digital Business Officer at Kotak Securities
However, Dinesh Thakkar, founder of Angel One, presented a contrasting viewpoint.
Thakkar argued that India’s market opportunity is “structural, not cyclical—and certainly not dependent on any one firm.”
He cited the increase in retail participation as proof of strong market fundamentals. Equity derivatives have jumped from 2% in 2018 to over 40% in 2025, he said.
Thakkar also noted, “When one player exits, others step in—and often, very fast.”
He pointed to global trading firms already expanding into India.
Uncertainty Ahead
The immediate task is assessing the actual impact on trading volumes. As **Nithin Kamath** of Zerodha acknowledged, “The next few days will be telling. F&O volumes might reveal just how reliant we are on these prop giants.”
The **Jane Street** situation illustrates how regulatory interventions can create broader consequences across the derivatives ecosystem. The market now awaits clarity on how international trading firms will respond and how domestic players will adjust.
