Despite reforms, 91% of retail traders still lose money in India’s booming derivatives market: SEBI study

India’s derivatives party may be cooling off. The Securities and Exchange Board of India (SEBI) has released a detailed comparative study showing how its recent regulatory crackdowns have started to bite into trading volumes in the Equity Derivatives Segment (EDS), especially among individual investors. The reforms, designed to strengthen market stability and investor safeguards, are reshaping one of the world’s most hyperactive derivatives markets.

The study offers a stark reminder of the risks facing retail participants. Approximately 91% of individual traders in EDS posted net losses during FY2025 — a figure that mirrors losses in FY2024.

In response to risks posed by the rapid rise of derivatives trading, SEBI introduced further reforms on May 29, 2025. These include stronger risk disclosures, curbs on misleading ban periods in single-stock derivatives, and tighter monitoring of concentration and manipulation risks in index options. 

Data covering December 2024 to May 2025 reveals index options turnover fell 9% year-on-year in premium terms and 29% in notional terms. Yet, the longer horizon tells a different story: compared to two years ago, trading activity is up 14% in premium terms and 42% in notional terms, signaling robust structural growth despite the recent dip.

Individual investor behavior has also shifted significantly. Premium-based turnover by individuals dropped 11% year-on-year, but remains 36% higher than the same period in 2023. Meanwhile, the number of unique individual traders in EDS shrank 20% from last year, although it’s still 24% above 2023 levels.

SEBI underscored that even with the recent pullback, derivatives volumes in India remain strikingly high compared to global markets, particularly in index options.