Retail Investors Lose Rs 1.06 Lakh Crore in FY25 Derivatives Trading: SEBI Report

Retail investors in India faced massive losses of over ₹1.06 lakh crore in the derivatives segment of the stock market in the financial year 2024–25 (FY25), according to the latest report by the Securities and Exchange Board of India (SEBI).

SEBI’s study revealed that nearly 91% of retail traders who traded in derivatives, especially in the futures and options (F&O) market, suffered losses. This marks a 41% jump from the previous year (FY24), where the losses stood at ₹74,812 crore.

How Much Did Individual Traders Lose?

According to SEBI’s report:

• The average loss per trader in FY25 was ₹1.1 lakh, compared to ₹86,728 in FY24.
• Around 96 lakh unique traders participated in the derivatives market during FY25.
• About 9 out of 10 traders ended up losing money, showing that the situation hasn’t improved much from last year.
• Interestingly, the number of traders went down by 20% compared to FY24 but was still 24% higher than two years ago.

Why Are More People Getting into F&O Trading?

Here are the 5 key reasons why retail investors are entering the risky F&O segment:

1. Quick Money Temptation: Many believe that they can double or triple their money in a single day through derivatives trading.
2. Low Investment Barrier: People can trade in big indices like Nifty or Sensex with a relatively small amount of capital using options.
3. Rise of Discount Brokers: Platforms like Zerodha, Groww, and Upstox have made trading easy and accessible for everyone.
4. Social Media Influence: Many influencers on YouTube, Instagram, and Twitter flaunt big profits, motivating others to try F&O trading.
5. Internet Penetration: With internet available in rural areas, more people are getting exposed to stock market trading.

Retail Traders Lost ₹2.87 Lakh Crore in 4 Years

Retail investors have been consistently losing money in derivatives over the past few years. Here’s a year-wise breakup of total losses:

• FY22: ₹40,824 crore
• FY23: ₹65,747 crore
• FY24: ₹74,812 crore
• FY25: ₹1.06 lakh crore

This adds up to a total loss of ₹2.87 lakh crore in just four years, highlighting how risky the F&O segment is for individual investors.

What is SEBI Doing to Protect Investors?

SEBI is actively working on tightening regulations to safeguard retail investors from heavy losses. Key actions taken include:

• Reducing weekly expiry to limit excessive trading.
• Increasing the lot size for derivative contracts to reduce small, speculative trades.
• Raising margin requirements to ensure traders have more funds before taking large positions.
• Increasing surveillance on big and active traders to detect any manipulation.

Understanding Derivatives: Futures and Options Simplified

What is Derivatives Trading?
Derivatives are financial contracts whose value is based on an underlying asset, such as a stock or index. The two main types of derivatives are futures and options.

Futures Explained:

A futures contract is an agreement to buy or sell a stock or index (like Nifty or Bank Nifty) at a fixed price on a future date.

Example:

• Bank Nifty is trading at ₹48,000.
• You buy 1 future contract with a lot size of 15.
• Notional Value = ₹48,000 × 15 = ₹7,20,000.
• You pay a margin of around ₹1,00,000 (not the full amount).
• If Bank Nifty goes up to ₹49,000, you gain ₹15,000.
• But if it drops to ₹47,000, you lose ₹15,000.

Options Explained:

An option contract gives you the right (but not obligation) to buy or sell a stock/index at a fixed price in the future.

Example:

• Bank Nifty is at ₹48,000.
• You buy a put option with a strike price of ₹47,500, premium ₹200, lot size 15.
• Premium = ₹200 × 15 = ₹3,000 (this is your cost).
• If Bank Nifty falls to ₹47,000 at expiry, profit = (47,500 – 47,000 – 200) × 15 = ₹4,500.
• If Bank Nifty rises to ₹48,500, you lose the premium = ₹3,000.

Why Do Most Traders Lose Money in F&O?

• Derivatives are complex and require advanced knowledge.
• Most retail investors don’t understand the risks fully.
• Trades are often based on speculation rather than strategy.
• Market volatility can lead to large, unexpected losses.

Broker Revenues Depend on F&O Trading

Stock brokers earn a major part of their revenue (between 65% to 85%) from F&O trading. In 2023, Zerodha’s founder Nithin Kamath mentioned that stricter F&O rules by SEBI may affect brokerage revenue significantly.

While F&O trading may seem attractive due to the possibility of quick profits, SEBI’s data shows that most retail investors are losing significant amounts of money every year. It’s important for investors to educate themselves, understand the risks involved, and avoid getting influenced by flashy claims on social media.