Sebi Study Reveals Stark Wealth Transfer in F&O Market: Retail Traders Lose Rs 72,000 Crore
MUMBAI: A damning new report from the Securities and Exchange Board of India (Sebi) has shed light on the lopsided nature of the Indian derivatives market, revealing that institutional players and proprietary traders are consistently reaping massive profits at the expense of individual retail participants.
According to the latest study, proprietary (prop) traders—a group that includes global entities operating in India—emerged as the biggest beneficiaries during the fiscal year 2026 (FY26), raking in a staggering Rs 44,000 crore in gross trading profits.
The Great Wealth Transfer
The data highlights a significant imbalance in the F&O space, where professional institutions and large-scale traders dominated the landscape. While prop traders led the pack, other institutional categories also posted healthy gains:
- Foreign Funds: Rs 14,000 crore
- Corporates: Rs 8,000 crore
- Mutual Funds: Rs 3,000 crore
- Partnership Firms/LLPs: Rs 3,000 crore
In stark contrast, individual retail traders bore the brunt of market volatility, suffering a combined gross trading loss of approximately Rs 72,000 crore. Sebi’s analysis further noted that 99% of the profits generated by foreign funds and prop traders were driven by algorithmic (algo) trading entities, underscoring the technological advantage held by big-money participants. It is important to note that these figures represent gross profits and losses before accounting for transaction costs.
A Cooling Effect on Retail Participation
The report also points to a notable shift in investor behavior. Following repeated warnings and increased regulatory scrutiny, the number of active individual traders in the derivatives segment dropped by roughly 20%, falling from 98.1 lakh in FY25 to 78.6 lakh in FY26.
Perhaps more telling is the 40% decline in new market entrants, suggesting that the "retail frenzy" seen in previous years may be undergoing a significant cooling phase.
Persistence of Losses
Despite the overall decline in the number of participants, the failure rate for retail traders remains alarmingly high. Sebi reported that while the aggregate net loss for individual traders saw a slight dip—dropping from Rs 1.12 lakh crore in FY25 to Rs 91,685 crore in FY26—the fundamental experience for the retail investor has not improved.
The study concluded that nearly 88% of individual traders continued to lose money during the fiscal year. These figures serve as a sobering reminder of the high-risk nature of the derivatives market and the structural disadvantages faced by smaller, non-institutional players in an environment dominated by high-frequency, algo-driven institutions.
