Jane Street Investigation Impact: 4 Stocks Lose Rs 12,000 Crore in Market Value

Markets regulator Sebi’s investigation into Jane Street may have unintended consequences for Dalal Street, as was evident on Friday when four capital market-related stocks collectively lost Rs 12,000 crore in market value. The regulatory action has exposed the market’s dependence on proprietary trading firms and their domestic partners. Nuvama Wealth Management, Jane Street’s local trading partner in India, suffered the steepest decline on Friday, falling 11.26%, despite not being implicated in any wrongdoing in Sebi’s investigation. Shares of stock exchange BSE and Angel One dropped around 6% each, while CDSL fell over 2%. The combined erosion in market capitalisation was nearly Rs 12,000 crore.

The regulatory action targeted Jane Street and its affiliates for manipulating prices in Bank Nifty index options and underlying stocks, resulting in an order to disgorge unlawful gains of Rs 4,844 crore. However, the market’s reaction to Nuvama highlights how regulatory action against one entity can impact its business partners—even when they face no direct allegations. The sharp fall in Nuvama’s stock reflects investor concerns about potential revenue loss from the possible exit of a significant client, regardless of the firm’s conduct.

Prop trading firms like Jane Street account for nearly 50% of options trading volumes, noted Zerodha founder Nithin Kamath, highlighting the market’s concentration risk. The scale of the market’s dependence on proprietary trading firms becomes evident through the numbers. When a single entity controls half of the options volume, its potential exit creates significant uncertainty about future market liquidity and trading activity.

The concerns extend beyond immediate volume impacts. The immediate market reaction suggests traders are already pricing in a potential decline in volumes across Indian capital markets. Analysts warn that the regulatory action could put pressure on the revenue of intermediaries heavily dependent on derivatives trading, with volumes likely to shrink in response to Sebi’s measures against one of the segment’s largest prop trading firms.

Despite this optimism, the immediate challenge is gauging the actual impact on trading volumes. The Jane Street episode underscores how regulatory action—while targeting specific misconduct—can have broader ripple effects across the derivatives ecosystem. The Rs 12,000 crore selloff on Friday reflects investor concerns over volume contraction and revenue pressure, particularly for intermediaries with direct exposure to the banned firm.

As the market adjusts to this new reality, attention will turn to whether other international trading firms can fill the liquidity vacuum left by Jane Street’s exit—and how domestic players recalibrate their models to sustain revenue in a changing regulatory landscape.

According to the source: The Economic Times.