A staggering 91% of individual traders in India’s equity derivatives market lost money during the financial year FY24–25, according to a detailed study released by market regulator Securities and Exchange Board of India (SEBI). The regulator’s findings show that despite new risk-control measures and regulatory tightening, the tide of retail investor losses continues unabated.
According to the "Comparative Study of Growth in Equity Derivatives Segment vis-à-vis Cash Market After Recent Measures", net losses of individual traders surged 41% year-on-year (y-o-y) to Rs1,05,603 crore in FY24-25 from Rs74,812 crore in FY23-24, even as participation rose and market volumes remained high. The study analysed trading data of nearly 96 lakh individual investors, accounting for the bulk of participants in the equity derivatives segment (EDS), especially in index options.
This marks the second consecutive year in which SEBI observed a similar pattern, with around nine out of 10 individual traders ending up in the red. The average per-person loss in FY24-25 was Rs1.1 lakh.
Worrying Trends despite Regulatory Push
The study focuses on the six-month period from December 2024 to May 2025—after SEBI began rolling out a series of regulatory reforms to enhance investor safety and reduce speculative excesses. These included:
- Rationalisation of weekly and monthly index derivatives,
- Increase in minimum contract sizes,
- Mandatory upfront collection of option premiums,
- Intraday monitoring of position limits, and
- Enhanced tail-risk coverage on expiry days.
Still, the impact of these measures on curbing retail losses appears limited, at least in the short term.
“The equity derivatives segment continues to witness very high participation from individual investors, especially in index options. However, this participation is not translating into positive outcomes for the majority of traders,” SEBI says in the report.
Turnover Falls, but Long-term Growth Persists
Between December 2024 and May 2025, index options turnover declined by 9% in premium terms and 29% in notional terms compared to the previous year. However, when compared to two years ago, turnover was still up 14% and 42%, respectively.
Similarly, the turnover by individual traders in premium terms dropped 11% y-o-y but remained 36% higher than two years earlier. The number of unique individual traders also fell by 20% compared to the previous year, although it was up 24% from FY22–23 levels.
SEBI highlighted that India continues to rank among the highest globally in terms of equity derivatives activity—particularly in index options—with the number of traded contracts in Indian exchanges more than four times that of the next closest market.
Explosive Growth in Index Options
Over the six-year period from FY19-20 to FY24-25, trading activity in index options surged dramatically. The average daily premium traded in index options rose from Rs4,359 crore in FY19-20 to Rs64,881 crore in FY24-25—an eye-popping compound annual growth rate (CAGR) of 72%. In notional terms, the average daily turnover of index options soared over 33 times, from Rs12.6 lakh crore to over Rs418 lakh crore.
In comparison, SEBI says the cash market grew at a CAGR of 25%, indicating a pronounced shift in retail trading activity towards derivatives, particularly high-risk, short-term instruments like index options.
Losses Deepen despite Lower Participation
The SEBI study also examined quarterly profitability trends during FY24-25. While the number of traders fell sharply—from 61.4 lakh in the first quarter (Q1) to 42.7 lakh in the fourth quarter (Q4)—the percentage of loss-making traders remained elevated, peaking at 88.5% in the third quarter (Q3) before dropping marginally to 86.4% in Q4.
Interestingly, SEBI noted a slight improvement in profitability in Q4 of FY24-25 following the implementation of some of its new measures. Aggregate losses fell by 26% from Q3 to Q4, while average loss per person dipped by 8%—from Rs62,975 to Rs57,920.
Despite this, the full-year picture remains grim. The share of trading losses has remained consistently high across years:
90.2% of traders lost money in FY21-22,
91.7% in FY22-23,
91.1% in FY23-24, and
91% in FY24-25.
Small Retail Traders Most Affected
The study also broke down participation by trading volumes, revealing that traders with lower turnover (below Rs1 lakh) experienced the most significant decline in participation compared to the previous year. Yet, this same group saw the largest increase when compared to two years ago, suggesting continued interest from small investors despite mounting losses.
For example, traders in the Rs10,000–Rs1 lakh turnover bucket fell 22% from the previous year but rose 33% compared to two years ago. In total, 67.7 lakh unique traders participated in EDS between December 2024 and May 2025—down from 84.2 lakh the year before, but up from 54.8 lakh two years ago.
SEBI's Call for Continued Vigilance
The regulator says it will continue to monitor trends in index options turnover and retail participation to assess the effectiveness of these interventions.
SEBI’s findings reaffirm concerns that retail traders—lured by the promise of quick gains—often underestimate the complexity and risks of derivative trading. The regulator has consistently cautioned that equity derivatives are sophisticated instruments not suited for uninformed retail investors.
As derivatives volumes remain robust and the market continues to evolve, SEBI’s policy focus is now firmly on balancing access and innovation with investor protection and systemic stability.
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Virtually everyone reading the Bloomberg article, and this article, has above-average income, assets, education, career advancement opportunities, etc. So it’s hard for many of us to intuitively grasp the subconscious reasoning of those in the lowest income quartile, who purchase the most lottery tickets. But you can imagine it going something like this:
We live paycheck to paycheck and savings seems out of reach. Our prospects for much higher wages seem out of reach. We can’t afford nice vacations, new cars, health insurance, or homes in safe neighborhoods. We can’t put our kids through college without debt. Much of the stuff you Bloomberg/Collaborative Fund readers either have now, or have a good chance of getting, we don’t. Buying a lottery ticket is the only time in our lives we can hold a tangible dream of getting the good stuff that you already have and take for granted. We are paying for a dream, and you may not understand that because you are already living a dream. That’s why we buy more tickets than you do.
You don’t have to agree with this reasoning. They still made a bad financial decision. But I can kind of understand why they did it. I can kind of understand why the poorest people buy the most lottery tickets.
A lot of decisions are statistically wrong but intuitively right for the person making them.
https://collabfund.com/blog/no-one-is-crazy/
If we are using this logic, then just ban cigarettes, sugar, carbohydrates, condoms, and everything that makes people veer off their path. Oh wait, why not just restrict access to them by forcing supermarkets to sell only to healthy folks with high metabolism? Say what? It's the same logic SEBI is using for market participants. Tomorrow, some other hare-brained logic will be used. It's so easy to nitpick SEBI at this point, when the problem is the mentality and fetish for rules.
My view is regulation is a manifestation of stupidity and fear. An insecure person makes rules and has controlling behaviour. What applies in personal relationships applies to market regulation as well.
Let everything come under the ambit of the police. We have too many policemen doing nothing anyway. Put them into good use. We need fewer bureaucrats and more police personnels. Let police go afer Jane Street and the likes. Police instill fear better than a docile market regulator.