Indian Retail Traders Lose ₹91,685 Crore In F&O Trading In FY26 Despite SEBI Curbs On Derivatives

Indian retail investors suffered losses of ₹91,685 crore from equity futures and options (F&O) trading in the financial year ended March, highlighting the continuing challenges faced by regulators in curbing risky derivative trading among individuals.

The losses were lower than the previous year’s ₹1.1 trillion, while the number of active traders also declined to less than 8 million from 9.8 million, according to data shared by Minister of State for Finance Pankaj Chaudhary.

Regulatory steps fail to fully curb retail F&O losses

The decline in participation followed a series of measures introduced by the Securities and Exchange Board of India (SEBI) after its study showed that nine out of 10 retail traders incurred losses in the derivatives segment.

SEBI has raised contract sizes, tightened position limits and introduced additional safeguards to reduce excessive participation in options trading. The Reserve Bank of India has also brought in stricter funding norms for proprietary traders and brokers.

However, the continued losses among retail participants indicate that regulatory measures have had limited impact. Market experts have called for further steps to prevent individual investors from taking excessive risks in derivatives.

Impact of curbs spreads across derivatives market

The regulatory changes have also affected stock exchanges, which benefited significantly from the surge in retail trading activity. Average daily notional turnover in futures and options listed on the National Stock Exchange declined 23% to ₹214 trillion in July from June, marking a 17-month low.

Despite restrictions, retail traders continue to hold a significant share of the derivatives market. Individuals accounted for nearly 31% of equity derivatives trading, compared with 26% a year earlier, according to NSE data.

The measures have also influenced institutional participants. Proprietary traders, including high-frequency trading firms, saw their share of derivatives turnover fall to 58.1% in June from more than 60% last year.

Market participants said while SEBI’s objective of protecting retail investors is justified, the broader impact of restrictions needs to be assessed.

Experts believe regulators need to strike a balance between limiting speculative activity and ensuring that market liquidity and institutional participation are not adversely affected.