SEBI Chief Urges Retail Investors to Re-Evaluate F&O Trading as Chronic Losses Persist — September 17, 2026

Retail investors participating in India's equity futures and options (F&O) market must critically evaluate whether derivatives trading works for them, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey warned on Thursday. The market regulator highlighted that a large section of individual participants continue to suffer recurring capital losses even after spending three to four years actively trading in the segment.

Speaking on the sidelines of the NaBFID Infrastructure Conclave, Pandey emphasized that derivatives are structurally designed for risk management and hedging rather than speculative short-term gains.

"Even after 3-4 years of trading, there are a lot of retailers in continued losses. So it is a matter of understanding... if they are not ready for that market, then should they go for it or not? Because they are continuously getting losses," Pandey said.

Regulatory Measures Show Early Results, But Risks Remain

The SEBI chief noted that regulatory interventions have succeeded in reducing aggregate losses, but underlying retail behavior remains a major area of concern. According to the regulator's latest study on individual derivatives traders for FY26:

• Aggregate net losses of individual traders declined to approximately Rs 91,685 crore in FY26, down from Rs 1.12 lakh crore recorded in FY25.
• Despite the decline in total quantum, around 87.7% to 88% of individual traders continued to post net losses during the financial year.
• Over recent years, loss-making individual traders consistently accounted for roughly 9 out of every 10 participants, highlighting that longevity in the segment does not automatically yield profitability.

Over the past year, SEBI introduced a series of stringent guardrails to cool retail speculation in index and stock derivatives. These included raising contract sizes, restricting weekly index expiries to one per exchange, mandating upfront collection of option premiums, increasing risk margins on expiry days, and stepping up intraday monitoring of market-wide position limits.

Lower-Income Households Most Vulnerable

SEBI's data analysis revealed that the derivatives boom has increasingly drawn participants from tier-2 and tier-3 towns, with lower-income households taking the hardest hit.

Key Demographic Findings:

• About three-fourths of individual derivatives traders fell into the annual income bracket of below Rs 5 lakh.
• This income category accounted for 43% of total turnover but bore 53% of aggregate net trading losses.
• Close to 88% of traders within the sub-Rs 5 lakh income bracket suffered losses, compared to an 81% loss ratio among traders earning above Rs 1 crore annually.

Pandey remarked that because a massive proportion of Indian households are fundamentally risk-averse and prioritize capital safety, luring inexperienced savers into high-risk leveraged instruments threatens domestic financial resilience.

Focus on Cash Markets and Long-Term Capital

The regulator stressed that capital markets must serve the broader economy by channeling domestic household savings into long-term capital formation, equity investments, and infrastructure rather than zero-sum speculation.

Pandey reiterated that the capital markets watchdog will maintain continuous surveillance over trading patterns in the equity derivatives segment to ensure systemic stability and investor protection. For retail investors, the message from India's chief market regulator remains direct: understand leverage, calculate downside risk, and avoid speculative derivatives if the strategy repeatedly erodes principal capital.

Tags: SEBI NSE Derivatives Futures and Options Capital Markets