India’s tax authorities on Monday launched a sweeping crackdown across multiple cities, targeting some of the country’s most powerful new age trading firms and other brokers. At the center of the action was Graviton Research Capital LLP, the Gurgaon-based high-frequency trading (HFT) powerhouse that has become synonymous with India’s lightning-fast trading revolution.
According to sources familiar with the investigation, tax officials raided Gravitons headquarters in Cyber City Gurgaon as part of a probe into alleged misuse of hedging structures. The raids were likely conducted by the Chandigarh unit, sources said.
Founded in 2014 by IIT Delhi alumni Ankit Gupta and Nishil Gupta, Graviton has grown into India’s largest homegrown HFT player. Company filings show it reported revenues of ₹4,960 crore in FY24 and profits of over ₹600 crore in FY23, marking one of the fastest growth trajectories in the financial services sector. Its headcount rose nearly 40 percent over the past year to 426 employees, with a talent base drawn from top engineering and quantitative universities across India and abroad.
Graviton’s Gurgaon nerve center—an open office buzzing with coders, mathematicians, and proprietary traders—has been a magnet for India’s brightest quants. Engineers reportedly draw packages of ₹50–70 lakh, senior quants exceed ₹1 crore, and even summer interns from elite global campuses are rumoured to take home ₹10–12 lakh a month. The firm’s “ideas over hierarchy” culture and ultra-low latency trading platforms have made it a talent magnet, often poaching from global giants like Tower Research and Citadel.
But the same secrecy that fuels innovation may now be attracting regulatory heat.
The Offshore Profit Shuffle
Investigators are probing several brokers for what they describe as a profit–loss transfer mechanism—a practice long suspected in certain sections of India’s derivatives market. The model, according to tax officials, involves executing one leg of a trade on Indian exchanges to record losses locally, while simultaneously placing mirror-image positions on overseas bourses such as CME, ICE, or SGX to book untaxed or lightly taxed profits abroad.
The trades are often structured as “hedges” but lack genuine economic rationale, officials said, allowing profits to migrate offshore while Indian books show depressed taxable income. “It’s not hedging—it’s arbitraging the tax system,” said one source.
The practice, they added, has proliferated in commodity derivatives—especially crude oil and gold—where positions are mirrored between MCX and foreign exchanges.
While the Securities and Exchange Board of India (SEBI) has been tightening oversight on algorithmic strategies and offshore exposure, the tax department has reportedly been compiling dossiers on the sector for several years. Monday’s raids, insiders said, were the first coordinated action targeting the “cross-border leg” of such trades.
However, it is not yet clear if Graviton is being investigated for the same or for some other matter.
Wider Net: Brokers and Market Intermediaries
The crackdown wasn’t limited to Graviton. Searches were also carried out on Jainam Broking, Sunflower Broking, RK Global, and Stocko (SAS Online), among others, with investigators seizing servers and trade logs to trace alleged circular trading and crypto-linked flows.
Books of accounts and entries and trading systems of these mid-tier brokerage firms, active in derivatives and commodities, are under scanner.
Industry Giants Under Lens
The sweep follows SEBI’s high-profile action in July 2025 against US-based Jane Street, accused of manipulating expiry-day prices in Bank Nifty futures to reap illicit gains of over ₹4,800 crore. The regulator’s 105-page order detailed “aggressive morning purchases and evening reversals” designed to distort prices to the detriment of retail investors.
The incident rattled the global HFT ecosystem and prompted a wider review of foreign algorithmic participation in Indian markets.
In the aftermath, SEBI and the tax department have turned their attention to domestic players with international footprints—particularly those operating from GIFT City, where trades enjoy exemptions from securities transaction tax (STT) and stamp duty.
Algo Boom, Regulatory Reckoning
Gurgaon’s Cyber City has quietly become India’s HFT capital, hosting global trading houses such as Tower Research Capital, AlphaGrep Securities, Quadeye Securities, Jump Trading, and iRageCapital. These firms employ thousands of quants and software engineers, commanding salaries that rival Silicon Valley pay scales.
But with profits now measured in microseconds and trades straddling continents, regulators are struggling to keep pace. The current raids, officials said, represent an attempt to bring transparency to an industry whose operations have largely remained opaque.
“This is not about one firm,” said a former regulatory official. “The entire ecosystem of algorithmic and offshore trades requires a deeper probe. The idea is to ensure profits made on Indian market activity are taxed where they’re earned.”
The End of the Algo Free Run?
For nearly a decade, India’s HFT ecosystem has operated in the shadows—celebrated for its speed, yet rarely scrutinized for its complexity. SEBI's Jane Street order, and IT raids in the aftermath mark a turning point.
Possibly with server cloning and forensic audit, authorities are betting that their offensive will help plug what they call “the biggest revenue leak in modern market history.”
The age of unbridled speed may be giving way to the era of accountability.
Email query sent to all the brokers named in the story remained unanswered. Their responses will be added to the story as and when received. |
