Net losses of individual traders in F&O widen by 41% to Rs 1.06 lakh crore in FY25: SEBI study

By | July 8, 2025
Net losses of individual F&O traders FY25 increase by 41% according to SEBI

In a sobering revelation, the Securities and Exchange Board of India (SEBI) has highlighted the widening chasm of retail losses in the equity derivatives market. According to SEBI’s latest study, net losses incurred by individual traders in the Futures and Options (F&O) segment jumped by a staggering 41% in FY25, totaling ₹1.06 lakh crore—up from ₹74,812 crore the previous fiscal year.

The study paints a grim picture of retail speculation, with 91% of individual traders suffering losses, despite various regulatory curbs introduced to deter excessive risk-taking. This data underscores the inherent dangers of retail participation in complex financial instruments without adequate knowledge or risk management strategies.

Retail Participation: A Double-Edged Sword

Over the past few years, India’s retail investors have shown unprecedented interest in the stock market, especially in the derivatives segment. The F&O segment, in particular, has witnessed a surge in participation, driven by social media influencers, trading apps, and low entry barriers. However, SEBI’s FY25 findings reveal that this enthusiasm has come at a significant cost.

Key Highlights from the SEBI Study:

  • Losses escalated from ₹74,812 crore in FY24 to ₹1.06 lakh crore in FY25—a 41% year-on-year rise.
  • 91% of traders posted net losses, similar to FY24, confirming that the issue is systemic and persistent.
  • Average loss per trader increased to ₹1.1 lakh.
  • Female traders formed 20% of the F&O trader base and reported a median loss of ₹72,400.
  • Male traders recorded a higher median loss of ₹94,400.

This upward trend in losses occurred despite a noticeable drop in active participation. The number of individual traders in the derivatives segment declined by over 20% from the previous year, with participation falling from 6.14 million in Q1 FY25 to 4.27 million in Q4 FY25. This indicates a pullback by retail investors, possibly due to past losses, SEBI curbs, or greater market awareness.

Regulatory Intervention and Its Impact

Recognizing the growing speculative frenzy, SEBI introduced several reforms in late 2024 aimed at curbing reckless trading. These included:

  • Limiting the number of expiries per stock.
  • Increasing the lot size for options contracts.
  • Enforcing upfront premium payments to discourage over-leveraged bets.
  • Mandating enhanced risk disclosures by brokers.

While these measures led to a moderation in trading volumes, especially in Q4 FY25, the overall retail turnover remained significantly higher than levels seen two years ago. According to the study, the premium turnover in index options fell by 9% year-on-year, and notional turnover declined by 29% between December 2024 and May 2025. Still, compared to the same period in 2022–23, these volumes were up 14% and 42%, respectively.

This suggests that short-term deterrents worked, but structural challenges in the market remain.

The Lure of F&O: Easy Entry, Hard Exit

The popularity of the F&O market among Indian retail investors can be attributed to several factors:

  • Low capital requirements: Options trading requires far less margin than cash market investments.
  • High return potential: The leverage factor in F&O means one can earn (or lose) large sums with small investments.
  • Widespread marketing: Social media channels, YouTube influencers, and telegram groups have glamorized options trading.
  • Gamification of trading apps: Platforms often encourage trading behavior that mimics gaming, rewarding frequency rather than prudence.

Unfortunately, many individual traders jump into F&O without understanding volatility, time decay, or hedging techniques. This makes them highly vulnerable to market swings and manipulative strategies employed by institutional players.

Who Is Losing and Why?

The SEBI study observed that newcomers to F&O trading are disproportionately affected. Many first-time traders do not take the time to learn risk management or position sizing. The lack of awareness and the pressure to make quick gains often result in poor decision-making.

In addition, brokers and influencers sometimes promote options trading with unrealistic expectations, downplaying the risks. SEBI is actively investigating these practices and may soon implement stricter advertising guidelines for financial influencers and trading platforms.

A Call for Financial Literacy

While regulation can act as a deterrent, experts believe that financial literacy holds the key to long-term investor protection. SEBI, along with educational institutions and fintech platforms, needs to scale up efforts in:

  • Conducting regular investor awareness workshops.
  • Integrating financial education into school and college curricula.
  • Making derivatives education mandatory before allowing retail participation.

More importantly, individual investors must self-regulate and avoid treating the market like a casino. Derivatives are tools for risk management, not wealth creation for beginners.

Conclusion: Proceed With Caution

The F&O market offers opportunities, but it is not meant for everyone—especially those without experience, discipline, and risk tolerance. SEBI’s FY25 report is not just a wake-up call for retail investors, but also a signal to the broader ecosystem—brokers, platforms, and influencers—to act responsibly.

Retail investors must treat this warning seriously. The data clearly shows that without proper knowledge, 91% of them are more likely to lose than win in the current F&O landscape. As India’s financial markets continue to grow, sustainable participation will only come through informed, cautious, and long-term investing strategies—not short-term speculation.