Retail F&O Losses Rose to Over ₹1 Lakh Crore: Trader Participation Dropped 20%

A new study by the Securities and Exchange Board of India (SEBI) indicates that the retail rush into equity derivatives may be slowing, following a series of regulatory measures. However, the scale and frequency of investor losses remain deeply concerning.

In FY25, net losses among individual traders in the equity derivatives (F&O) segment surged 41% year-on-year, reaching ₹1.06 lakh crore — up from ₹74,812 crore in FY24, even after factoring in transaction costs. The average loss per trader also jumped significantly to ₹1.1 lakh, compared to ₹86,728 the previous year.

Investor Participation Declines, but Still Elevated

While the number of unique retail participants in the F&O market dropped by 20% in FY25 compared to the previous year, overall participation remains 24% higher than two years ago. In terms of premium turnover, individual investors saw an 11% year-on-year decline, but volumes are still up 36% when compared to FY23 levels.

Index options, which make up the bulk of F&O trading, experienced a 9% decline in premium turnover and a sharp 29% drop in notional turnover over the past year. Nonetheless, when viewed over a two-year horizon, activity is still elevated — up 14% in premium terms and 42% in notional value.

SEBI Flags Structural Risks as Losses Persist

SEBI underscored that a staggering 91% of retail traders in F&O recorded net losses in FY25, reinforcing the systemic risks facing uninformed or overleveraged investors. The regulator confirmed it will maintain close oversight of index option trading, focusing on investor protection and overall market integrity.

Four-Year Losses Near ₹3 Lakh Crore

Between FY22 and FY25, retail investors have collectively lost nearly ₹3 lakh crore in the equity derivatives segment. The annual breakdown of net losses shows a troubling trend:

• FY22: ₹40,824 crore
• FY23: ₹65,747 crore
• FY24: ₹74,812 crore
• FY25: ₹1,05,603 crore

This 4-year cumulative loss of ₹2,86,986 crore illustrates the substantial and sustained financial damage faced by individual traders.

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Conclusion

The findings come amid SEBI's wider efforts to curb excessive retail participation in complex derivative instruments. The regulator is increasingly focused on enhancing financial literacy, enforcing stricter risk controls, and building a more robust framework to protect less-informed investors in the rapidly expanding F&O landscape.

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