₹91,685 crore lost in F&O! Nearly 9 in 10 retail traders ended FY26 in the red, even as participation declined

The retail rush into India’s equity derivatives market may be slowing, but the losses remain steep. Individual traders lost ₹91,685 crore in FY26, down 18% from ₹1.12 lakh crore a year earlier, with nearly nine in 10 ending the year in the red, according to the latest study by the Securities and Exchange Board of India (Sebi).

Options trading remained the biggest drag, accounting for around 92% of the aggregate losses incurred by individual traders. At the same time, retail participation cooled, with the number of active individual traders falling 20% to 78.6 lakh in FY26 from 98.1 lakh a year earlier.

The number of new entrants also declined by around 40%, suggesting that regulatory measures and greater awareness of the risks associated with derivatives trading may be starting to temper the retail rush.

Despite the moderation in aggregate losses, 87.7% of individual traders incurred losses in derivatives market during FY26, while the average loss per loss-making trader increased marginally to around ₹1.17 lakh, the data showed.

“Around 92% of aggregate losses incurred by individuals arose from options trading,” Sebi said in its study on the profitability of individual traders in the equity derivatives segment.

The futures segment accounted for only a small share of individual participation. The proportion of traders who traded in futures declined marginally to 6.6% in FY26 from 6.7% in FY25.

Transaction costs remain a drag

The data also highlights the significant transaction costs borne by individual traders. They incurred around ₹25,000 crore in transaction costs during FY26, while cumulative transaction costs paid by individuals over FY22-FY26 stood at approximately ₹1 lakh crore.

“Individual traders incurred transaction costs of around ₹25,000 crore during FY26. Over FY22-FY26, cumulative transaction costs paid by individuals were approximately ₹1 lakh crore,” the study said.

Although derivatives premium turnover moderated during FY26, total transaction costs remained broadly unchanged, partly due to the increase in Securities Transaction Tax (STT) effective October 1, 2024, the regulator said in its report.

The findings also underline the sharp divergence in outcomes across different categories of market participants. Proprietary traders recorded the highest gross trading profit at about ₹44,000 crore, followed by foreign portfolio investors (FPIs) at ₹14,000 crore, corporates at ₹8,000 crore, and mutual funds and partnership firms/LLPs at around ₹3,000 crore each.

In contrast, the gross trading loss of individual traders narrowed to about ₹72,000 crore. Sebi also found that 99% of the profits made by FPIs and proprietary traders came from “Algo entities”.

Expiry-day trading dominates

Retail activity also remains heavily concentrated around expiry. Around 59% of index options turnover was generated in contracts expiring on the same day, or 0DTE. The share rises to 75% for contracts expiring within a day and 97% for those expiring within a week.

The findings point to a continuing concentration of derivatives market risks among smaller and relatively less capitalised traders, even as overall participation moderates.

Smaller investors take the biggest hit

The studies also show that traders with smaller equity portfolios bore a disproportionate share of the losses. Around 35% of individual equity derivatives traders had no equity holdings, while nearly 78% had equity portfolios worth less than ₹1 lakh.

Traders with equity portfolios below ₹1 lakh accounted for around 70% of aggregate losses, despite contributing only about half of the total turnover.

The loss rate also declined steadily as the size of an investor’s equity portfolio increased. It stood at 93% for traders with no equity holdings and fell to 58% for those with equity holdings of more than ₹10 crore.

The two studies, conducted by Sebi’s Department of Economic and Policy Analysis, examine the participation, trading behaviour and profitability of individual investors in the equity derivatives segment.

The profitability study is based on information collected from the top 15 brokers in the equity derivatives segment, representing approximately 90% of all individual investors in the segment. The second study on trading behaviour is primarily based on a random sample of 5,000 individual traders, supplemented by profitability data from the top 15 brokers.

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