India's equity derivatives market saw a striking shift in FY26, with nearly 90% of traders recording financial losses, according to a study by the Securities and Exchange Board of India (Sebi). The study found that 88% of individual traders incurred losses during the fiscal year, with total net losses amounting to ₹91,685 crore.

The findings extend a pattern Sebi has documented across successive studies of the segment: 93% of individual F&O traders lost money over FY22-FY24, and 91% lost money in FY25. The FY26 loss tally, however, is smaller than the ₹1.05 lakh crore that individual traders lost in FY25.

Retail participation declined by an unexpected 18%, marking a significant shift not seen in a decade. Regulatory changes pushed numerous new traders out of the market, the study noted, while trading activity became notably concentrated in short-dated options — where the highest risks fell on younger investors with smaller portfolios.

Those regulatory changes date to October 2024, when Sebi approved a package of curbs on equity derivatives aimed at reining in speculative retail activity. Since November 2024, weekly expiries have been limited to one benchmark index per exchange, minimum contract sizes were raised to ₹15-20 lakh, and expiry-day margins were increased, with upfront premium collection from option buyers phased in afterwards.

The stakes cut both ways for the industry: options turnover is a major revenue driver for exchanges and brokers, and derivatives volumes cooled after the curbs took effect, making the trade-off between reducing retail losses and preserving market activity central to the segment's next phase. How the loss ratio and participation evolve from here, and whether Sebi calibrates its rules further, will be closely watched.

Source: Economic Times Markets