As volatility pulsed via the Dalal Road, its tremors reached Parliament Road, residence to Indian regulators and watchdogs. The query was not nearly worth actions—it was about market integrity. May the extremely choreographed market manipulation be disguised because the quant agency’s buying and selling benefit on account of asymmetry of knowledge, powered by pace and technique?
What started as whispers about uncommon expiry-day patterns quickly became a full-blown regulatory storm. After months of deep surveillance, the Indian market regulator, the Securities and Change Board of India (Sebi), issued a strong interim order towards Jane Road and its associates for suspected market manipulation.
Jane Road’s alleged playbook
In response to the order, Jane Road executed a intelligent however misleading playbook. On key Nifty Financial institution expiry days, it could first purchase giant volumes of key banking shares within the money market throughout early buying and selling hours. This shopping for lifted Nifty Financial institution sharply, creating the phantasm of bullish momentum.
With the index climbing, they concurrently purchased put choices—bearish bets—at dirt-cheap costs whereas the remainder of the market remained euphoric. Then got here the twist: after securing the choices, they dumped the identical banking shares, inflicting a pointy market fall. As Nifty Financial institution dropped, the worth of these put choices skyrocketed, permitting Jane Road to ebook huge earnings.
Sebi’s interim order alleges this technique was used throughout 18 Nifty Financial institution and three Nifty expiry days, leading to earnings of over ₹43,289 crore, of which ₹36,500 crore was linked on to expiry-day trades. Sebi discovered this too calculated to be coincidental and froze ₹4,844 crore, ordering it into an Indian escrow account. All Jane Road entities have been additionally barred from buying and selling in Indian markets till additional discover.
Nightmare for retail merchants
Jane Road’s refined algorithms ran silent however deep, making split-second trades that moved markets and mined earnings. However for lakhs of Indian retail merchants who logged into their dealer apps each Thursday expiry, hoping to make small positive aspects from Nifty and Nifty Financial institution choices, the expertise was nothing in need of a recurring nightmare.
Within the high-stakes area of derivatives this was a zero-sum recreation, however a rigged one. Each rupee earned by Jane Road in these choices trades was a rupee misplaced—principally by India’s small buyers, pensioners, and first-time futures & choices (F&O) lovers seduced by the lure of weekly earnings.
Sebi’s personal report confirmed that for almost 93% of the lakhs of retail merchants in choices, expiry Thursdays turned synonymous with repeated losses as patterns failed, momentum reversed, and belief eroded – week after week.
Debt and taxes
However the tragedy didn’t finish with monetary losses. For Indian retail buyers, the nightmare prolonged into one other realm altogether: tax notices. Many buyers unfamiliar with the advanced guidelines of F&O tax reporting didn’t accurately disclose these losses of their earnings tax returns. The outcome? Compliance notices, tax scrutiny, and audit threats—even for many who had no actual earnings.
Whereas Indian retailers suffered each monetary loss and tax stress, Jane Road Singapore Pte Ltd—the primary offshore beneficiary—walked away with hundreds of crores in earnings, reportedly with out paying a single rupee in Indian taxes.
How? Through the use of the India-Singapore Double Taxation Avoidance Settlement (DTAA). With no “everlasting institution” in India, and cautious structuring, Jane Road was capable of legally keep away from tax on these spinoff positive aspects. It is a textbook case of treaty procuring and tax arbitrage, through which international giants use authorized buildings to bypass what home merchants can’t.
Classes to be taught
Retail buyers can’t play blind whereas international whales commerce with radars. Sebi should improve expiry-day surveillance, tighten place disclosures, and audit cash-derivatives linkages.
For tax authorities, the injustice is evident—Indian merchants face scrutiny even after losses, whereas overseas giants like Jane Road escape tax through DTAA loopholes. The federal government should invoke Common Anti Avoidance Rule (GAAR), impose withholding tax on offshore positive aspects, and simplify F&O loss reporting for home merchants.
For Indian buyers, the important thing lesson is consciousness — know the foundations, dangers, and tax duties. In a recreation that’s not all the time honest, abstinence stays the perfect type of safety.
Mayank Mohanka is founder, TaxAaram India, and a accomplice at S.M. Mohanka & Associates.
