Retail participation in equity derivatives took a step back in FY26 after years of rapid expansion, with the number of active individual traders falling 18% year-on-year to around 88 lakh, according to SEBI's latest study on the profitability of individual traders in the equity derivatives segment.
The decline marks the first annual reversal in the number of individual traders in the segment in more than a decade. The active trader base had expanded from around 7 lakh in FY15 to more than 1 crore in FY25, with growth accelerating sharply after FY21.
Despite the FY26 decline, retail participation remains substantially above its pre-FY21 levels. The trader base in FY26 was still more than 12 times the level recorded in FY15, indicating that the latest decline represents a moderation rather than a complete reversal of the structural expansion in participation.
The pullback was concentrated largely in options, which account for the overwhelming majority of individual equity derivatives traders. Participation in futures remained considerably smaller in absolute terms, although the decline in index futures participation was particularly pronounced.
The moderation also comes alongside a sharp decline in the addition of new participants, with the number of new entrants falling 40% in FY26, highlighting a moderation in the flow of retail traders into the derivatives segment.
SEBI described the decline in participation as a “partial retrenchment rather than a complete reversal” of the post-FY21 expansion.
Losses fall, but the odds remain stacked against retail traders
The regulator's report further revealed that the aggregate net losses of individual traders declined to about Rs 91,685 crore in FY26, compared with about Rs 1.12 lakh crore in FY25. Despite lower aggregate losses, 87.7% of individual traders continued to incur losses during FY26. Average loss per trader increased marginally to about Rs 1.17 lakh during FY26.
Around 92% of aggregate losses incurred by individuals arose from options trading. The share of traders who traded in the futures segment declined marginally to 6.6% from 6.7%.
Individual traders incurred transaction costs of around Rs 25,000 crore during FY26. Over FY22–FY26, cumulative transaction costs paid by individuals were approximately Rs 1 lakh crore.
"Although derivatives premium turnover moderated during FY26, total transaction costs remained broadly unchanged due to the increase in Securities Transaction Tax (STT) effective October 1, 2024," said SEBI.
Trading remained highly concentrated in contracts close to expiry. Approximately 59% of index options turnover occurred in contracts expiring on the same day (0DTE), around 75% within one day of expiry and 97% within one week of expiry, according to SEBI.
About 35% of individual EDS traders had no equity holdings, while nearly 78% had equity portfolios below Rs 1 lakh. Small-portfolio (portfolio below Rs 1 lakh) traders accounted for about 70% of aggregate losses despite contributing only about half of the turnover. Loss rates fall steadily as equity portfolio size increases — from 93% for traders with no equity holdings to 58% for those holding over Rs 10 crore.
