Summary:
SEBI’s F&O measures have led to the first decline in retail participation in nearly a decade, with individual traders falling to 87.5 lakh in FY26. While total retail losses dropped 18% to ₹91,685 crore, losses per investor increased slightly, with 87.7% of traders still losing money. The shift is expected to reduce speculative trading while increasing the share of professional and institutional participation.
India’s thriving futures and options (F&O) market witnessed a turnaround as the regulator imposed certain restrictions to cool down excessive speculation. The retail participation in India’s fast-growing derivatives market saw its first-ever drop in FY26 after witnessing a rapid rise in the previous years.
SEBI’s primary objective with the policy was to curb speculation and protect the retail investors.
As a result, the number of retail traders who participated in the F&O market either directly or indirectly dropped significantly in FY26.
The number of individual investors who took part in the equity derivatives market dropped to around 87.5 lakh in FY26 from 106.2 lakh in FY25
This was the first-year reduction in individual investors after nearly a decade of uninterrupted growth.
The fall was primarily seen among the new entrants. New investors dropped sharply to 20.8 lakh in FY26 from 34.3 lakh in FY25. On the other hand, the number of exiting investors jumped to 46 lakh in FY26. About 46 lakh investors who participated in the F&O market in FY25 did not return in FY26.
Moreover, a majority of investors who dropped in FY26 belonged to the lower turnover bracket. Small retail traders with a low turnover were the most affected ones owing to stricter position limits, higher weekly expiry limits, option premiums, and higher brokerage charges.
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Retail Losses Dip YoY; Still, Individual Traders Continue to Participate in the Market
Losses, individually, were also down significantly in FY26. Individual losses in the F&O market dropped to ₹91,685 crore in FY26 from ₹1.12 lakh crore in FY25. This indicates an 18% year-over-year (YoY) reduction in losses. However, the fall in losses should be assessed with caution as the drop in losses was primarily due to a fall in the number of individual investors.
On the other hand, the losses per individual investor increased slightly in FY26. Losses per individual investor were at ₹1.17 lakh in FY26 compared to ₹1.13 lakh in FY25. Nearly 87.7% of all individual investors who participated in the F&O market continued to see losses in FY26.
Options Continue to Remain the Biggest Contributor to Individual Losses in the Derivatives Market
Options trading continues to remain the largest contributor to individual losses in the derivatives market. Around 99% of individual investors participated in options trading while majority of them traded only options as compared to futures.
SEBI’s report on individual participation in the derivatives market stated that options trading was the most common strategy for individual investors. Moreover, a majority of these investors used to trade in options till expiry, and the trading activity was majorly concentrated near expiry.
F&O Restriction Impact Stock Broking Sector
The recent F&O restrictions have impacted the stock broking sector. With fewer retail investors trading in the options segment coupled with a drop in new entrants, the impact on revenue growth for brokers will be more as compared to other segments.
However, firms with a diversified revenue model and those which derive lesser proportion of revenues from trading activities and more from the wealth management segment, and provide long-term investment products might not see a meaningful impact.
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F&O Market to See More Professional Individual Investors and Institutional Participation
The derivatives market in India has crossed the early adopter phase and will see more participation from professional individual investors and institutional investors.
Institutional investors continue to contribute significantly towards algorithmic trading volumes in the derivatives segment. Moreover, algorithmic trading has been a significant contributor to the profit generation by institutional investors.
SEBI’s measures have come as a major setback to individual investors, especially those using aggressive speculation techniques. However, it will take time for individual investors to adapt to the changed scenario. Although the F&O participation by individual investors will continue to dwindle, those who continue to invest will become more mature investors.
