BSE, Angel One, Groww: Capital market stocks plummet up to 10% post RBI's new rules: All you need to know

RBI last week tightened rules for loans taken by firms that undertake proprietary trading in shares and commodities and offer leverage to clients, the latest measure aimed at reducing speculative market activity in the country.

Proprietary trading (prop trading) is when a financial institution trades its own money in stocks, bonds, currencies, commodities, or derivatives to earn profits—instead of trading on behalf of clients.

All credit facilities to securities firms will have to be backed by collateral, while lending for trading on their own account or investments by brokers will be prohibited, according to a statement published on the Reserve Bank of India’s website late Friday.

The so-called prudential rules for capital market intermediaries such as stock and commodity brokers will come into effect from April 1, the central bank said.

The latest step comes just days after India sharply raised the transaction tax on the trading of single-stock and index derivatives in a bid to reduce speculative trading. Combined with the central bank’s new rules, market participants fear the rules will hurt volumes.

The RBI has also asked banks to demand that guarantees extended by them on behalf of a broker for proprietary trades be fully secured, with 50% of collateral being in cash and the rest as cash equivalents and government securities.

The new rule will narrow the type of securities trading firms that can offer collateral to banks.

How individual stocks are faring

Shares of BSE Ltd plummeted as much as 9.5% to hit the day's low of ₹2,736 apiece on the NSE. Angel One shares were down 6% at ₹2,540.40 apiece, while Billionbrains Garage Ventures Limited, the parent firm of Groww, was down over 4% at ₹165.95 on the NSE.

According to Jefferies, the new norms proposed by the Reserve Bank of India (RBI) could impact 10–12% of options turnover, which may translate into an estimated nearly 10% hit to earnings for BSE, as per news reports.