Jane Street ban, F&O mess: BSE, NSE shareholders lose Rs 1.4 lakh crore in market cap; what's the outlook?
Shares of
BSE
and
NSE
have taken a big hit following the Jane Street controversy, regulatory actions in F&O trading, declining derivatives volume, and negative analyst reports. The shares have in total seen a Rs 1.4 lakh crore decline in market capitalization.
The significant decline has pushed BSE shares into a bear market, whilst NSE approaches a 20% reduction, according to an ET report. The situation worsened following SEBI's directive on July 3 that prohibited American quantitative trading company Jane Street from operating in Indian markets and froze Rs 4,840 crore of assets. SEBI alleged the firm conducted "an intentional, well-planned and sinister scheme" to manipulate Nifty Bank.
This resulted in an immediate reduction in derivatives trading volume and prompted brokerages to lower their ratings for exchange stocks, anticipating stricter regulatory measures.
BSE's share value has decreased by 22% from its Rs 3,030 peak on June 10 to Rs 2,376, resulting in a Rs 26,600 crore reduction in market value. According to WWIPL, which has data for unlisted shares, NSE has experienced a Rs 1.15 lakh crore decline, with shares falling 18% from their June 21 peak of Rs 2,590 to Rs 2,125.
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BSE, NSE Shares Outlook
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inancial analysts are now revising their ratings for exchange stocks downward. IIFL Capital has reduced BSE's rating to ADD, due to anticipated volume challenges. "The current uncertainty in the market (ban on Jane Street + possible scrutiny on other players + risk of more regulations amid rising retail losses) would weigh on near-term Exchange volumes," according to the brokerage firm quoted in the ET report.
In June, Motilal Oswal similarly lowered BSE's rating to neutral, expressing worries about potential market share decline following changes in weekly contract expiry schedules.
"BSE has declined around 22% from the record peak, and last fortnight's sustained downtrend has given the feeling that the stock has entered a full fledged bear trend," stated Anand James, Chief Market Strategist at Geojit Investments Limited.
The immediate consequences of Jane Street's ban were significant. During the first Nifty weekly contracts expiry after the restriction, NSE's total turnover decreased by 21% compared to the previous expiry session. Index options turnover on a notional basis reduced to Rs 472.5 trillion from Rs 601 trillion on July 3. NSE's total premium turnover reached its lowest point since March for an expiry day, with turnover approximately 40% below this year's average.
BSE's derivatives trading volumes have declined significantly, with Option Premium ADTO dropping 25% to Rs 105 billion in early July compared to June's average. IIFL Capital has reduced its volume projections by 6-8%, resulting in a 3-5% EPS reduction for FY26-28, following an earlier 4-5% EPS reduction in June 2025.
This decline is particularly concerning for investors, as recent SEBI data indicates that retail traders in India experienced substantial losses of Rs 1.05 lakh crore in derivatives trading during FY25.
The situation for retail traders has worsened considerably. While the number of individual derivative traders increased from 86.3 lakh in FY24 to 96 lakh in FY25, their financial losses grew more severely. The average loss per trader increased by 27%, rising from Rs 86,728 in FY24 to Rs 1,10,069 in FY25.
SEBI's regulatory circular of May 26 has introduced additional changes, requiring exchanges to restrict equity derivatives contract expiry to either Tuesdays or Thursdays, eliminating the previous alternating expiry schedule between exchanges.
NSE will change its equity derivatives expiry from Thursday to Tuesday starting September 1, 2025, while BSE has switched to Thursday from its previous Tuesday schedule.
The aggregate Option Premium ADTO declined significantly by 19% month-on-month, reaching Rs 510 billion in July, showing a 28% reduction compared to first quarter FY26. The decrease in volume was attributed to reduced volatility, as India VIX averaged 12 in July, lower than the previous month's 14 and first quarter FY26's 16.
"We believe weakness in volume can sustain in short term due to recent regulatory changes (ban on Jane Street + other members may also be under scrutiny)," IIFL Capital noted, pointing out that derivative volumes through colocation servers, predominantly used by high-frequency traders, constitute 55-60% of total volumes.
The impact of regulatory measures introduced in November 2024 to regulate derivatives trading is becoming evident.
According to SEBI's analysis from December 2024 to May 2025, index options turnover decreased by 9% year-on-year in premium terms whilst dropping 29% in notional terms. Individual trading activity showed an 11% reduction in premium terms year-on-year, accompanied by a 20% decrease in unique individual trader participation compared to the previous year.
Jefferies analysis indicates Jane Street's BSE turnover share is approximately 1%, pointing to minimal direct earnings impact.
"A 100bps impact on our FY26 premium estimates would impact EPS by ~60-70bps," according to the brokerage's assessment.
The forthcoming September expiry swap is anticipated to create additional challenges. According to IIFL Capital's projections, BSE will experience a 10-12% volume reduction following its expiry shift from Tuesday to Thursday. Based on updated calculations, IIFL Capital assigns BSE a valuation multiple of 45x (reduced from 50x) with a target price of Rs 2,200, suggesting an 11% potential decline.
"We downgrade the stock to ADD given near-term uncertainty, which would weigh on both earnings and valuations," states IIFL Capital, whilst maintaining optimistic long-term outlook considering potential 15-20% earnings enhancement.
The challenges facing the exchange sector highlight increasing regulatory scrutiny. Given the rising retail investor losses in F&O trading, SEBI might implement additional measures to restrict option trading volumes.
Currently, market participants anticipate further difficulties as the derivatives market undergoes restructuring, with exchange shareholders experiencing the primary impact of regulatory measures.
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