Jane Street Ban Just The Start? SEBI RA Warns Of More Pain As Regulatory Storm Hits Broking Stocks

Indian capital market stocks are facing a sharp correction on Friday, as investor confidence weakens in the face of mounting regulatory risks and foreign institutional exits, said Sanyam Vaish, a SEBI-registered analyst.

Angel One, Nuvama, Motilal Oswal, BSE, and other broking shares fell between 6% to 10%. Vaish noted that India’s market regulator, the Securities and Exchange Board of India’s (SEBI) ban on Jane Street and the growing chorus around its F&O crackdown are shaking up the sector, and that this could just be the beginning. 

What triggered the fall? 

Jane Street, a major global proprietary trading and arbitrage firm, has been barred from the Indian equity markets. This move comes amid SEBI's reported crackdown on the circumvention of algo-trading regulations. Although Jane Street does not operate retail platforms, this move will impact institutional liquidity, particularly in arbitrage and derivatives, both of which are crucial for capital market participants, Vaish highlighted.

He also observed that the broader concern hinges on SEBI's increasingly stringent stance on the futures and options (F&O) segment. Regulatory discussions are underway to ban or restrict zero-day expiry options, limit the frequency of weekly expiries, clamp down on gamified trading platforms, and increase scrutiny on leveraged intraday trades. 

This poses significant risks for brokers, as most of their growth since 2020 has come from retail F&O participation. A slowdown in F&O volumes directly hurts broker revenues, and the market is recognising this risk.

Capital market stocks: What next?

Nuvama has slipped nearly 9% on Friday, falling sharply below ₹8,000. Vaish noted that its technical structure is damaged, and ₹7,200 could be the next key level to watch. 

Angel One has slipped below ₹2,900. He sees the next support closer to ₹2,600, adding that the stock is likely to remain under pressure as F&O headwinds grow. 

Motilal Oswal has dropped to ₹923, continuing its downtrend. With no immediate trigger for reversal, it is approaching the make-or-break zone at ₹900. 

BSE has seen a sharp 6% decline, with equity turnover decreasing and F&O pressures affecting earnings visibility. 

Even IIFL Securities, despite a bounce, is under long-term resistance and is expected to stay volatile in the near term.

Vaish believes that this correction is more than a dip to buy. The sector is going through a structural derating. He noted that most capital market stocks were priced for perpetual growth, but that narrative is now challenged. Their business models are overly reliant on retail trading volumes (especially F&O), leverage-driven churn, and a historically light regulatory touch, all of which are facing challenges.

Unless there's a reversal in SEBI’s stance or a new growth driver emerges, these stocks may continue to underperform, according to him. 

For long-term investors, he advised caution and to remain on the sidelines. Short-term traders may look for opportunities in oversold bounces, but must use tight risk controls. Vaish cautioned new investors against mistaking falling stock prices for value. Until there’s clarity on the regulatory roadmap, he believes that this sector may remain a value trap in disguise.

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