SEBI Studies: 87.7% of Individual Traders Still Lost Money in Equity Derivatives in FY26

Retail losses in India's equity derivatives market have been a recurring policy concern for years — and SEBI's latest data confirms the pattern hasn't gone away, even as the market itself has cooled. Two studies released by SEBI's Department of Economic and Policy Analysis (DEPA) on August 20, 2026 show that 87.7% of individual traders in the Equity Derivatives Segment (EDS) still lost money in FY26 — despite active trader numbers falling by roughly a fifth and aggregate losses shrinking in absolute terms.

The two studies — Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26) and Trading Behaviour of Individual Traders in the Equity Derivatives Segment (FY25–FY26) — together paint a picture not just of how much money retail traders lost, but of the specific behaviours (options buying, near-expiry concentration, high trading intensity relative to capital) most strongly linked to those losses.

This is a data release, not a rulemaking exercise — SEBI has issued no new obligation or amendment here. But for compliance teams, brokers, and market analysts, the findings matter because they typically precede or reinforce policy discussion, and similar SEBI datasets have historically fed into changes to derivatives market structure.

How Were These Studies Conducted?

Both studies rely on client-level data covering equity derivatives transactions, transaction costs, investor demographics, trading behaviour, and participation patterns.

Did Retail Participation Grow or Shrink in FY26?

It shrank, on both counts that matter — total active traders and fresh entrants. Active individual traders fell by about 20%, and new entrants fell even faster, at about 40%, suggesting the moderation is being driven disproportionately by fewer people starting to trade derivatives in the first place, rather than only existing traders exiting.

How Many Individual Traders Actually Made Money?

Not many. Despite the fall in aggregate losses, the proportion of traders losing money barely moved — 87.7% of individual traders incurred losses in FY26, and among those who did trade, the average loss per trader actually ticked up slightly to about ₹1.17 lakh. Fewer people traded, but the odds of losing money if you did trade stayed almost exactly where they've been.

Where Did Individual Trader Losses Actually Come From?

Almost entirely from options, not futures. Around 92% of aggregate losses incurred by individuals arose from options trading, while the share of traders participating in the futures segment declined marginally, from 6.7% to 6.6%.

Who Was on the Other Side of These Trades?

Someone has to be profiting from the trades individual investors are losing on, and the studies name names — or at least categories. Proprietary traders (including globally-owned entities operating in India in a proprietary trading capacity) recorded the highest gross trading profit, followed by FPIs, Corporates, Mutual Funds, and Partnership Firms/LLPs. Individual traders' gross trading loss narrowed to about ₹72,000 crore.

What Did Transaction Costs Look Like for Individual Traders?

Individual traders paid around ₹25,000 crore in transaction costs during FY26. Zooming out, cumulative transaction costs paid by individuals over FY22–FY26 came to approximately ₹1 lakh crore. Notably, even though overall derivatives premium turnover moderated in FY26, total transaction costs stayed broadly unchanged — the studies attribute this to the increase in Securities Transaction Tax (STT) that took effect from October 1, 2024, which offset the effect of lower trading volumes on total cost paid.

How Concentrated Was Trading Around Contract Expiry?

Very. Trading remained heavily clustered in contracts nearing expiry — a pattern regulators have flagged repeatedly in recent years.

Does Portfolio Size Affect Trading Losses?

Clearly, and in a consistent direction: the smaller an investor's existing equity portfolio, the more likely they were to lose money trading derivatives. About 35% of individual EDS traders had no equity holdings at all, and nearly 78% had equity portfolios below ₹1 lakh. These small-portfolio traders accounted for about 70% of aggregate losses, despite contributing only around half of total turnover — meaning they lost disproportionately more than their trading activity alone would suggest.

How Do Individual Traders Actually Trade — Buying or Selling Options?

Overwhelmingly, by buying. Nearly 97% of traders predominantly followed options-buying strategies, while only around 2% were classified as majorly options sellers. The outcomes for the two groups diverged sharply — options sellers were largely the only strategy group to record positive median returns on capital employed in FY26, while options buyers recorded substantially weaker outcomes.

What Role Does Trading Intensity Play in Losses?

A large one. Trading intensity — measured across dimensions like days traded per year, turnover, turnover relative to capital, and turnover relative to equity portfolio — emerged as one of the strongest characteristics associated with trading outcomes. Across the board, higher turnover relative to capital or portfolio size was associated with higher loss rates. And it wasn't evenly distributed: younger investors, lower-income groups, and traders with smaller equity portfolios exhibited substantially higher trading intensity relative to their financial resources — the groups least equipped to absorb losses were also trading the hardest relative to what they had.

Does Trading Experience Improve Outcomes?

Not meaningfully, according to the data. The incidence of losses remained high across all levels of trading experience — traders with several consecutive years of participation in the EDS recorded loss rates similar to newer traders, suggesting that time spent trading derivatives did not translate into better results.

How Persistent Were Losses, Quarter to Quarter?

Persistent, and self-reinforcing. Among traders who lost money in two consecutive years and kept trading, around 90% lost money again in the following year. On a quarterly basis, losses were far more common than profits — approximately 85% of trader-quarter observations were loss-making, against only around 15% profitable. And even among traders who had both profitable and loss-making quarters, nearly 79% saw their average gains in good quarters come in smaller than their average losses in bad quarters — a lopsided pattern that erodes capital over time even for traders who aren't losing every single quarter.

Do Traders Stop After a Bad Quarter?

Many do, but not most. Between 28–40% of traders active in one quarter did not trade in the immediately following quarter, and among those who discontinued, around 86–89% had incurred losses in the prior quarter — so exit is meaningfully, though not perfectly, correlated with recent losses.

Are Traders Moving Away From the Cash Market Entirely?

There's a shift underway. While many investors historically entered derivatives after first participating in the cash (equity) market, the number of investors trading only in derivatives, with no cash market activity, has increased significantly over time — suggesting F&O is increasingly a first entry point into markets for some investors, rather than a later add-on.

Why Did SEBI Commission These Studies?

SEBI frames the purpose plainly: the equity derivatives market has seen significant growth in retail participation in recent years, and these studies aim to provide evidence-based insight into trading outcomes and behavioural characteristics of individual investors in this segment — across trading strategy, capital employed, turnover, trading intensity, demographics, participation patterns, and persistence of trading. The stated goal is to support informed policy discussion, not to announce a policy decision.

What Should Practitioners and Market Participants Take From This?

Frequently Asked Questions

CorpLawUpdates Analysis

The headline number that will get quoted everywhere is the ₹91,685 crore in aggregate losses — down sharply from FY25. But the more analytically important number in this release is 87.7%, because it tells a different story: the market didn't get safer for the individual trader, it just got smaller. Fewer people are trading, and among those who remain, the odds of losing money are essentially unchanged from the prior year. A shrinking loss pool driven by a shrinking trader pool is not the same thing as improving trader outcomes, and practitioners advising clients should be careful not to conflate the two when discussing this data.

The 99%-of-profit-from-algo-entities finding is arguably the sharpest structural insight here. It confirms what market participants have suspected for a while — that the profitable side of the retail-versus-institutional dynamic in F&O is not really "smart discretionary traders versus unlucky retail traders," it's largely systematic, automated strategies extracting value from a highly predictable, behaviourally-driven retail flow (heavy in options buying, concentrated near expiry, high turnover relative to capital). That's a much harder pattern to regulate or educate away than simple risk-disclosure improvements.

The portfolio-size findings deserve attention from anyone building suitability or risk frameworks. A 93% loss rate for traders with zero equity holdings, against 58% for those with portfolios above ₹10 crore, is about as clean a signal as this kind of data ever produces — F&O losses concentrate hardest among exactly the segment of investors with the least capacity to absorb them. Given that pattern has now shown up study after study, don't be surprised if it eventually translates into stricter net-worth or portfolio-based eligibility gating for certain derivatives products, rather than disclosure-only measures.

On what comes next: SEBI has explicitly framed this as evidence to "support informed policy discussions," not as a standalone announcement. The regulator has in the past followed comparable data releases with structural changes to areas such as margin requirements, lot sizes, and expiry-day rules — a pattern worth keeping in mind, though this release makes no commitment to any specific follow-up action. Practitioners in the derivatives brokerage and advisory space may still find it useful to treat this release as an early signal rather than a closed chapter, and to keep an eye out for any future consultation paper or circular touching 0DTE concentration, portfolio-based suitability, or transaction cost structure.