The enthusiasm of retail investors for the derivatives market showed its first clear signs of waning in FY26 after tighter regulations introduced by the Securities and Exchange Board of India (Sebi) kicked in, according to a study by the market regulator.
The number of traders exiting the equity derivatives segment exceeded new entrants in FY26 — the first time this has happened since FY15. In all, exits exceeded new entrants by about 2.5 million during the year.
The number of active equity derivatives traders also declined for the first time since FY15, falling 18% during the year. This ended a decade-long rise during which the number of active traders increased 12.5 times, from 0.7 million to 8.75 million. The average loss per trader, however, increased marginally to about Rs 1.17 lakh in FY26.
Trading activity remained heavily concentrated in contracts close to expiry. Around 59% of index options turnover came from contracts expiring on the same day, while 75% was generated by contracts expiring within one day and 97% by those expiring within a week.
Options trading accounted for about 92% of the aggregate losses incurred by individual traders.
In contrast, proprietary traders, including global participants operating in India and entities owned by foreign firms, recorded the highest gross trading profit at about Rs 44,000 crore. Foreign portfolio investors (FPIs) and corporates posted gross trading profits of around Rs 14,000 crore and Rs 8,000 crore, respectively. Mutual funds and partnership firms/LLPs recorded gross trading profits of about Rs 3,000 crore each.
Algorithmic traders accounted for about 99% of the profits earned by FPIs and proprietary traders.
The study also showed that the average loss among traders deploying less than Rs 10,000 in the equity derivatives segment nearly halved, from Rs 10,978 in FY25 to Rs 5,561 in FY26.
The proportion of loss-making traders was higher among those deploying capital of less than Rs 1 lakh, at 90.18%, with an average loss of Rs 44,000. Among traders deploying more than Rs 1 lakh, 81.13% incurred losses, though their average loss was substantially higher at Rs 9.19 lakh.
Median losses declined across trading categories, including only-options buyers, predominantly options buyers, predominantly futures buyers and predominantly options sellers. Traders predominantly selling options were the only category to record a positive median return, at 1% in FY26.