SEBI Study: 88% of Retail F&O Traders Lost Money in FY26

Individual traders in India’s equity derivatives market faced substantial losses in fiscal year 2026, with 88% of participants experiencing negative returns. A study by the Securities and Exchange Board of India (SEBI) quantified these total net losses at ₹91,685 crore.

This period also marked a notable shift in retail engagement, observing the first annual decline in a decade for retail participation. The number of traders dropped significantly from one crore in FY25.

Key Participation Figures in FY26

• Total traders fell by 18% to 88 lakh.
• New market entrants decreased by approximately 40%.
• About 46 lakh traders from FY25 did not participate in FY26.

The downturn followed a series of regulatory measures implemented by SEBI starting November 2024. These actions aimed to mitigate excessive speculation, particularly in short-dated index options.

SEBI’s Regulatory Interventions

• Restricting weekly expiries to one index per exchange.
• Increasing minimum contract sizes for derivatives.
• Tightening margin requirements for trading positions.
• Mandating upfront collection of options premiums.

Concurrently, the government increased the securities transaction tax on equity derivatives. SEBI noted that options participation saw a sharper decline compared to futures after these changes, though the study does not establish a direct causal link.

Trading activity showed a heavy concentration in contracts nearing their expiry dates. This pattern indicates a preference for high-risk, short-term positions among a large segment of traders.

Concentration of Trading Activity

• Approximately 59% of index options turnover occurred on the same day of expiry (0DTE).
• 75% of turnover happened within one day of expiry.
• 97% of turnover took place within one week of expiry.

The study further highlighted that the financial risks were disproportionately borne by smaller investors. A significant portion of derivatives traders operated without a foundational equity portfolio.

Demographics of Losses

• 35% of derivatives traders did not hold an underlying equity portfolio.
• 78% of traders had portfolios valued under ₹1 lakh.
• Small-portfolio traders (under ₹1 lakh) were responsible for 70% of the total losses incurred between FY25 and FY26.
• Young traders, under 30 years old, comprised 43% of individual derivatives traders, with 89% of them facing losses.
• Traders with an annual income below ₹5 lakh accounted for 53% of aggregate losses, despite generating only 43% of the turnover.

These findings underscore the significant financial risks inherent in India’s equity derivatives market, particularly for retail participants and those with smaller portfolios. The data suggests that regulatory efforts and market dynamics are shaping a new environment for futures and options trading.