AS MARKET regulator Securities and Exchange Board of India tightened norms to discourage speculation in equity derivatives, 2025-26 has for the first time witnessed an annual decline in the number of retail traders participating in this segment.
In what may worry policymakers, individuals with lower income of under Rs 5 lakh a year make up an overwhelming majority of retail F&O (futures and options) traders. From 75% in 2024-25, it is down only marginally to 73% in 2025-26. This shows “derivatives participation remained concentrated among lower-income individuals”, a SEBI report said.
Futures and options are instruments based on underlying company stocks or indices — hence called derivatives. They allow two parties to agree to trade a security at a later date at a predetermined price. This can help traders protect themselves from unexpected stock price movements. While options can lead to big losses, the possibility of outsized returns has made them very popular globally over the last decade or so.
According to this report titled ‘Profitability of individual traders in the equity derivatives segment (FY25-FY26)’, the number of retail traders has dropped 20% to 78.6 lakh from 98.1 lakh in 2024-25. But those who made losses remained high at 88% in 2025-26 compared with 91% in the previous year. The net losses, however, dropped 18% to Rs 91,685 crore in 2025-26 compared with Rs 1.12 lakh crore in 2024-25.
The number of youth trading in futures and options has, however, seen a sharper 26% decline to 32.83 lakh in 2025-26 from about 44 lakh the previous year. Still, the youth or GenZ (those under 30 years) made up the bulk of the retail traders at 43% of the total in 2025-26.
While comparable numbers for 2024-25 are not available, of the 32.83 lakh youth who traded in F&O in 2025-26, a massive 29.07 lakh or 89% made losses. Their losses were, however, only Rs 19,287 crore, which is around 20% of the total retail net losses of Rs 91,685 crore.
In another report ‘Trading behaviour of individual traders in the equity derivatives segment’, SEBI said the data does not establish that its tightening measures caused a higher exit rate. “The analysis does not establish a causal relationship,” it said.
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Interestingly, more and more women are participating in the F&O segment – they made up 17.1% of retail traders in 2025-26, up from 15.6% in 2024-25. And while fewer women make losses compared to men, the proportion remains highly elevated.
In 2025-26, 85% of women made losses while trading in F&Os, down from 88% the previous year. The corresponding figures for men are 89% in 2025-26 and 92% in 2024-25.
The profiteers
The F&O losses of India’s small traders gained global attention during US-based proprietary trading firm Jane Street’s April 2024 legal battle in the US over what it said was its confidential and “most profitable” trading strategy. It was then that SEBI began looking into the firm’s activities in India for any market abuse, resulting in its July 2025 order that said the firm had manipulated stock indices and made ‘unlawful gains’ to the tune of Rs 4,844 crore.
Backed by years of experience in the market, the fastest available internet, specialised algorithms, high-frequency trading strategies, and access to real-time, market-moving news, proprietary trading firms made a gross profit of Rs 44,483 crore in 2025-26 – not far from the Rs 45,955 crore profit they made in 2024-25.
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Proprietary, or prop, firms use their own capital to trade.
Foreign Portfolio Investors’ (FPIs) profits fell 55% to Rs 13,896 crore in 2025-26, with other big players, such as corporates, mutual funds, and Domestic Institutional Investors also posting declines.
“There are multiple factors behind this decline in profit, but the two primary drivers are the higher Securities Transaction Tax (STT) and lacklustre market conditions,” said Vipin Kumar, Assistant Vice President of equity research at Globe Capital Market. Currency depreciation and lower participation of retail investors — leading to the counterparty volumes shrinking – were among the other factors.
The Union Budget for 2026-27 hiked the STT on the F&O segment to curb speculative trading. However, F&O trade volumes crashed long before, following a crackdown by SEBI in October 2024. According to data from the World Federation of Exchanges, from a peak of 12.94 billion in October 2024, the total number of F&O contracts traded on the NSE collapsed nearly six times to 2.3 billion by February 2025.
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Latest available data shows a total of 3.87 billion futures and options contracts were traded in June.