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

Indian retail investors incurred ₹91,685 crore in losses from equity futures and options (F&O) trading in the financial year ended March, despite regulatory curbs by the Securities and Exchange Board of India (SEBI). The decline in losses compared to the previous year’s ₹1.1 trillion, but the number of active traders dropped to below 8 million from 9.8 million, according to data provided by Minister of State for Finance Pankaj Chaudhary.

SEBI introduced measures following findings that nine of every ten retail traders faced losses in derivatives. These measures included increasing contract sizes, tightening position limits, and additional safeguards to reduce excessive participation. The Reserve Bank of India also implemented stricter funding norms for proprietary traders and brokers.

However, the continued losses suggest that the regulatory measures have had limited impact. Market experts advocate for further steps to prevent individuals from taking excessive risks in derivatives. The regulatory changes have affected the stock exchanges, with average daily notional turnover in futures and options on the National Stock Exchange falling 23% to ₹214 trillion in July, hitting a 17-month low.

Despite the restrictions, retail traders still wield significant influence, accounting for nearly 31% of equity derivatives trading, up from 26% a year ago. Institutional participants like proprietary traders have also been impacted, with their share of derivatives turnover falling to 58.1% in June from over 60% the previous year.

While SEBI aims to protect retail investors, the broader consequences of these restrictions need to be evaluated, with experts suggesting a careful balance between limiting speculation and maintaining market liquidity and institutional participation.