Market Cap Plummets as Regulatory Actions Take Toll

Shares of BSE and NSE have experienced a significant downturn, with a combined market capitalization loss of Rs 1.4 lakh crore. This decline is attributed to the Jane Street controversy, regulatory interventions in F&O trading, a drop in derivatives volume, and unfavorable analyst reports.

The significant decline has pushed BSE shares into a bear market, whilst NSE approaches a 20% reduction.

Regulatory Crackdown and Its Immediate Effects

The situation worsened after SEBI's directive on July 3, which banned American quantitative trading company Jane Street from Indian markets and froze Rs 4,840 crore of assets. SEBI accused the firm of manipulating Nifty Bank, leading to a sharp decline in derivatives trading volume and prompting brokerages to downgrade exchange stocks.

Analyst Outlook and Future Projections

Financial analysts are revising their ratings for exchange stocks downward, citing volume challenges and regulatory uncertainties. IIFL Capital has downgraded BSE's rating to ADD, while Motilal Oswal has expressed concerns over potential market share losses due to changes in contract expiry schedules.

Impact on Retail Traders

Recent SEBI data reveals that retail traders in India suffered losses of Rs 1.05 lakh crore in derivatives trading during FY25, with the average loss per trader increasing by 27% from the previous year.

Looking Ahead

The derivatives market is undergoing significant restructuring, with exchange shareholders bearing the brunt of regulatory measures. Market participants anticipate further challenges as SEBI may introduce additional restrictions to curb option trading volumes.