SEBI Study: Trader Exits Outpace Entries As Average Individual Loss Ticks Up To Rs 1.17 Lakh

Individual participation in India's equity derivatives market declined sharply in fiscal 2026, with new trader entries falling even as the pace of traders exiting the market accelerated, according to a SEBI study on individual traders. While aggregate net losses incurred by individuals declined during the year, the average loss per trader increased, highlighting the persistent risks associated with derivatives trading.

Aggregate net losses for individual traders fell 18% to Rs 91,685 crore in fiscal 2026 from Rs 1.12 lakh crore in fiscal 2025. However, the average loss per individual trader rose 2.4% to Rs 1.17 lakh. Over the FY22-FY26 period, individual traders cumulatively lost Rs 3.85 lakh crore.

The Equity Derivatives Segment (EDS) recorded its first year-on-year decline in active individual traders since FY16. The number of active individual traders fell 18% to 87.5 lakh in FY26 from 106.2 lakh in FY25. The decline was accompanied by a sharp fall in new trader entries. New entries dropped 40%, while the pace of traders exiting the market accelerated by 76%. This indicates a significant shift in retail participation after years of rapid expansion in the derivatives segment.

Trading activity also moderated. Notional turnover growth slowed sharply to 4.2% in FY26 from 20.4% in FY25. The moderation was primarily driven by a 15% contraction in futures turnover, while options premium turnover increased 7%, largely due to index options.

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Retail participation remained overwhelmingly concentrated in options, with 99.3% of individual traders participating in the options segment. Options accounted for nearly 92% of total retail losses in FY26, underlining the disproportionate contribution of options trading to overall individual losses.

SEBI's study also found that losses were highly concentrated among a relatively small group of traders. Just 23% of individual traders accounted for nearly 90% of total retail losses.

Individual traders were the only major market category to record aggregate net losses in FY26. In contrast, proprietary traders and foreign portfolio investors booked gross profits of Rs 44,483 crore and Rs 13,896 crore, respectively.

More Experience Did Not Mean Better Outcomes

The SEBI study also found that greater trading experience did not necessarily translate into better outcomes. Around 42% of traders were active for more than 100 days in FY26, and these traders accounted for 94% of total turnover.

High-frequency traders accounted for 87% of total losses, while traders active for more than 100 days recorded an average loss of Rs 2.76 lakh.

The findings also show that persistent participation did not improve outcomes for most experienced traders. More than 95% of traders who remained active for four or five consecutive years incurred cumulative losses.

Derivatives Trading Detached From Cash Equity Ownership

The study highlighted a significant disconnect between derivatives activity and ownership of underlying equities. Around 35% of EDS traders, or 42.8 lakh individuals, held no underlying cash equities.

At the same time, 78% of EDS traders had cash-equity portfolios worth less than Rs 1 lakh. Traders with small cash portfolios generated derivatives turnover equivalent to 1,665 times the value of their equity portfolios.

Around 24% of FY26 EDS traders recorded zero turnover in the cash market. Derivatives-only traders had a loss incidence of around 90%, while traders combining derivatives activity with substantial cash-market participation recorded an 84% loss rate.

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