A recent study by the Securities and Exchange Board of India (Sebi) indicates a notable shift in India's equity derivatives market during fiscal year 2026 (FY26). Proprietary traders, a key segment of the market, saw their gross profits decline by 3% year-on-year, reaching ₹44,483 crore, down from ₹45,955 crore in FY25.
Non-Individual Categories See Profit Declines
The reduction in proprietary traders' profits was mirrored across most other non-individual investor categories. Foreign Portfolio Investors (FPIs) experienced a significant 55% drop in gross profits, settling at ₹13,896 crore. Mutual funds, partnership firms and Limited Liability Partnerships (LLPs), and corporates also reported substantial declines in their gross profits by 54%, 38%, and 22% respectively during FY26.
Individual Traders' Losses Decline, But Risk Remains
While proprietary profits dwindled, individual traders saw a 26% reduction in their gross losses from equity derivatives, falling to ₹72,243 crore in FY26 from ₹97,882 crore in FY25. The proportion of individual traders incurring net losses also saw a slight improvement, decreasing to 87.7% in FY26 from 90.9% in FY25 and 91.1% in FY24. Despite this decline, the study highlights that nearly nine out of ten individual traders continued to report net losses in the equity derivatives segment.
Furthermore, participation among individual traders also decreased, with the number of active individual traders falling approximately 20% to 78.6 lakh in FY26, down from 98.1 lakh in FY25.
Options Dominate Profits and Losses
The Sebi study underscored the critical role of options contracts in the derivatives market. Options continued to account for the vast majority of both proprietary traders' gross profits and individual traders' gross losses. Specifically, options contributed about 98% of proprietary traders' gross profits in FY26, and more than 90% of individual traders' gross losses originated from the options segment.
Regulatory Measures to Strengthen Market
The report also referenced regulatory measures introduced by Sebi during FY25 aimed at enhancing risk management within the equity derivatives market. These measures included restricting weekly derivative contracts to one index per exchange, increasing minimum contract sizes, requiring upfront collection of options premiums, and implementing additional risk-management protocols. Sebi stated these actions were taken to strengthen the overall stability and integrity of the derivatives market.