‘Money power, not fundamentals’: Uday Kotak warns of distorted markets amid Jane Street storm

As the Jane Street story deepens, ace banker Uday Kotak has weighed in with a stark warning about the structural imbalances gripping Indian capital markets—shifting focus beyond the headlines to what he calls a breakdown in fundamentals.

In a sharp post on X, Kotak flagged three worrying trends he believes the recent events around Jane Street have brought to light: “money power, low liquidity in single stocks vs. index derivatives, and exchange-broker business models increasingly linked to volume, less to fundamentals.” 

His message comes as SEBI’s crackdown on Jane Street—a US-based quant trading firm accused of large-scale market manipulation—has sent ripples through India’s trading ecosystem.

Kotak emphasized that the stock market’s primary role is to promote capital formation and fair price discovery, suggesting that the dominance of volume-driven business models risks distorting that purpose. 

While he did not name Jane Street directly, the timing and content of his remarks align with the regulatory storm surrounding the firm.

Jane Street has been barred from trading in Indian markets following SEBI’s sweeping interim order issued July 3–4. The regulator has accused the firm of inflating index levels, particularly on expiry days, through mirror trades and expiry-day cash-futures strategies involving Indian and offshore entities. The result, SEBI claims, was misleading price movements that hurt retail investors while Jane Street and its affiliates booked profits estimated between ₹36,500 and ₹43,000 crore.

SEBI has impounded ₹4,843 crore as allegedly unlawful gains and frozen all bank and demat accounts linked to Jane Street’s operations in India. The firm has 21 days to respond and has publicly stated its intention to contest the findings.

Meanwhile, the broader market is left grappling with a deeper question—whether India’s fast-growing derivatives market, now the largest in the world by volume, is too dependent on opaque strategies and volume-based incentives.