Share Market Crash / The stock market was shaken by the action on Jane Street, Rs 12,000 crores were lost!

Share Market Crash: The Indian stock market was rocked on Friday, with four major capital market stocks falling sharply in the wake of a SEBI (Securities and Exchange Board of India) probe. The fall exposed the fragile interdependencies of the market. SEBI's action on foreign trading firm Jane Street affected not only it, but also its Indian partners and the entire derivatives market. As a result, market value of about Rs 12,000 crore was wiped out in a single day.

Nuvaama suffered the biggest loss

Jane Street's Indian trading partner Nuvama Wealth Management suffered the biggest blow in the uproar. Its shares tumbled as much as 11.26% on Friday, although the SEBI probe found no wrongdoing by Nuvama. Still, fear spread among investors and they started selling shares. The potential loss of a large client like Jane Street could impact Nuvama's earnings, which further accelerated the sell-off by investors.

Apart from this, shares of stock exchange BSE and brokerage firm Angel One fell by about 6%, while shares of Central Depository Services (CDSL) fell by more than 2%. The market value of these four companies has been reduced by a total of Rs 12,000 crore.

Allegation of manipulation in Bank Nifty

SEBI has accused Jane Street and its affiliates of manipulating Bank Nifty index options and underlying stocks. The regulator ordered these firms to return alleged illegal earnings of Rs 4,844 crore. This action was regarding the irregularities of Jane Street, but it affected the entire market. Prop trading firms like Jane Street handle about 50% of the volume of options trading in the Indian market. Zerodha founder Nithin Kamath warned that retail trading (which is about 35% volume) could also be deeply affected if such firms exit the market.

Threat to high-frequency trading

Siddharth Bhamare, Head of Institutional Research, Asit C. Mehta, said, "Jane Street is one of the largest traders in the Indian market. When action is taken against such firms, the rest of the players become cautious and reduce their activities. This may reduce trading volumes." He further said that traders will now get fewer counterparties, which may lead to a further decline in futures and options (F&O) volumes.

Ashish Nanda, President, Kotak Securities, said that this action can have a big impact on high-frequency trading (HFT) firms. "HFT firms bring huge liquidity to the market. If their activities reduce, retail volumes will also be affected. Many firms will now be rethinking their strategies."

Increasing influence of retail investors

Amidst this crisis, some experts are optimistic. Dinesh Thakkar, Founder, Angel One, said that the structure of the Indian market is strong and it is not dependent on any one firm. “The share of retail investors in equity derivatives is expected to increase from just 2% in 2018 to over 40% in 2025. This shows the strength of the market.”

“When one player goes out, another takes its place,” Thakkar added. He mentioned global firms such as Citadel Securities, IMC Trading, Optiver, Jump Trading and Millennium that are expanding their presence in India. These firms are setting up local units, hiring talent and investing in infrastructure.