Mumbai: The US tariff overhang and high-frequency trader Jane Street’s absence from Indian markets following a regulatory order in July resulted in a significant drop in trading turnover both on equities cash and options segments last month, per market analysts.
The previous time that month-on-month turnover on the National Stock Exchange fell more sharply was in March 2024, when it slumped 24%, per NSE data.
In the NSE cash segment, where shares are bought and sold daily, turnover plummeted 19% month-on-month to ₹17.77 trillion from ₹21.85 trillion in July, per NSE data. Equity options’ premium turnover fell 10% sequentially to ₹8.99 trillion in August.
The drag was chiefly because of reduced activity by the cohort in the highest trading bracket of ₹10 crore and above—they accounted for 71% of the decline in the cash segment turnover.
While this cohort accounted for 78% of the total turnover in the cash market in August, they made up just 0.2% of the 10.79 million total investor count, per NSE data. Their turnover fell 17%, or ₹2.89 trillion, month-on-month in August to ₹13.88 trillion.
As for equity options’ premium turnover, the cohort trading in excess of ₹10 crore accounted for 68% of the overall ₹8.99 trillion turnover in August. They contributed to 76% of the ₹1.02 trillion sequential fall to ₹8.99 trillion in August, per NSE data, accounting for 0.2% of the total 3.1 million investors who traded last month.
“The lacklustre market movement in August following the US’s punitive trade sanctions on India and reduction in activity by HFTs (high-frequency traders) following Jane Street’s absence since July caused the cohorts accounting for a bulk of turnover in cash and options segments to post a fall in their turnover to lead the drag,” said Rajesh Baheti, managing director of Crosseas Capital, among India’s largest proprietary trading firms.
Firms implementing strategies similar to Jane Street also pulled back following the Securities and Exchange Board of India’s interim order against Jane Street for alleged market manipulation, he added.
Impact of Jane Street ban
Jane Street has denied the findings in Sebi’s interim order of 3 July and filed an appeal with the Securities Appellate Tribunal (SAT).
The US hedge fund said in its appeal to SAT that it had not made any fresh purchases in the Indian securities markets despite Sebi lifting trading restrictions after it deposited ₹4,844 crore in an escrow account.
SAT first heard Jane Street’s contentions on 9 September; the next hearing is scheduled for 18 November.
Narinder Wadhwa, managing director and chief executive of SKI Capital, attributed the drop in turnover in the cash and options segments to both geopolitical tensions and reduced HFT activity post Sebi’s order against Jane Street.
In the cash segment, investors trading between ₹10,000 and ₹1 lakh accounted for a 37% share last month, and 35% in the options segment.
NSE has argued against what it called a “misconceived notion” of high retail participation in equity derivatives. Of the 35.8 million investors who traded in the equity cash and derivatives segments during the 12 months through August, 78% of the 9.2 million individual investors who traded in equity derivatives also traded in the equity cash segment, the bourse said in its latest Market Pulse edition.
A Sebi study published on 7 July showed that 91% of about 9.6 million individual traders ₹1.1 lakh each”>lost ₹1.1 lakh each, on average, trading equity derivatives in 2024-25, up from a loss of ₹88,728 per trader in FY24.
The National Stock Exchange accounted for 92.6% of equity cash market volumes and 76.4% of equity options premium volumes as on 31 August, per NSE data. National Securities Depository Ltd, which listed on BSE on 6 August, was partly behind an increase in BSE’s cash market share from 6.6% at the end of July to 7.4% last month.
