India's retail F&O losses reflect a global trend of widespread losses among individual investors in derivatives markets, according to SEBI's latest comprehensive study. The Securities and Exchange Board of India reviewed studies from Brazil to South Korea and found that across jurisdictions, both transaction-level academic studies and regulatory analyses report high loss rates among individual participants in futures, options, CFDs, and foreign-exchange markets. International evidence consistently indicates that retail investors globally incur losses when trading derivatives and other leveraged products, SEBI stated. In Brazil, 97 per cent of individuals who continued day trading equity-index futures for more than 300 days made a net loss, while only 1.1 per cent earned more than the country's minimum wage from the activity. South Korean research showed that about 75 per cent of retail day traders in KOSPI 200 futures lost money after fees, with more frequent and intensive trading associated with poorer outcomes.
India's retail F&O market is experiencing a significant demographic transformation, with traders below 40 now representing the majority of individual participants. According to SEBI's latest F&O study covering FY25 and FY26, traders below 30 accounted for 32.83 lakh, or 43 per cent, of individual F&O traders in FY26, up from 31 per cent in FY22. Another 35 per cent were aged between 30 and 40, bringing the total share of traders below 40 to 78 per cent of the market. This shift reflects the growing appeal of derivatives trading among younger investors, even as they hold only 29 per cent of the aggregate equity portfolio of individual F&O traders. The report shows a derivatives market that is beginning to look very different from what it did during the post-Covid explosion in retail participation.
The intensity of participation varies significantly across age groups, with younger traders demonstrating higher turnover ratios relative to their equity portfolios. As reported by The Hindu BusinessLine, traders below 30 generated turnover worth 93 times the value of their equity portfolios in FY26, compared with 73 times for those aged between 30 and 40. For traders aged 50 and above, the ratio was approximately 20 times. This inverse relationship between age and turnover intensity suggests that younger traders are more actively participating in derivatives markets despite holding smaller equity portfolios. The global pattern reinforces this trend, with higher trading intensity consistently associated with higher loss rates and larger losses across international markets.
Despite higher turnover ratios, younger traders face significantly lower average losses compared to their older counterparts. According to the SEBI study covering FY25 and FY26, traders aged between 30 and 40 lost ₹36,642 crore, accounting for 41 per cent of individual traders' total losses. In contrast, traders below 30 lost ₹19,287 crore, or 22 per cent of total losses. While 88.55 per cent of traders below 30 lost money, compared with 88.05 per cent of those aged between 30 and 40, the average loss was substantially higher for the latter group at ₹1,36,418 compared with ₹58,749 for younger traders. However, the most concerning statistic is that 89% of traders under 30 reported losses in FY26, the highest among all age groups, as reported by Mint citing Sebi data. The changing age profile is part of a wider transformation in the retail derivatives market, which has increasingly drawn investors outside India's largest cities and from relatively lower-income groups.
The appeal of derivatives trading among younger investors continues despite the high odds of losses, driven by the potential for outsized returns. As reported by The Hindu BusinessLine, a 33-year-old engineer-turned-full-time trader explained that the possibility of making more than 10 per cent returns within a week kept him engaged in the market. However, some traders have exited after experiencing consistent losses, with a 29-year-old trader citing SEBI's tightening of F&O regulations as a factor in his decision to stop trading derivatives altogether. The rise in younger participation coincides with a 20 per cent decline in the total number of individual traders during the year, though the youngest age group remained the largest segment. The study also found that nearly three-fourths of individual derivatives traders reported annual incomes below ₹5 lakh, accounting for 43% of turnover but 53% of total losses. Around 91 per cent of individual traders in India's equity derivatives segment incurred net losses during FY25-FY26, with cumulative losses exceeding ₹2 lakh crore, even after aggregate losses moderated to 87.7 per cent in FY26.
