Proprietary trading firms, including those owned by global companies, saw their gross profit from equity derivatives decline to ₹445 billion, approximately $4.65 billion, in the financial year ended in March. This drop follows the cooling of speculative fervor brought on by curbs implemented by the market regulator.
According to a study published by the Securities and Exchange Board of India (SEBI), the cohort's gross profit fell by nearly 3% compared to 460 billion rupees in the previous financial year. Most major categories of traders experienced declining profits during the period, while individual investors recorded smaller overall losses.
Losses for individual investors, calculated before accounting for trading costs, declined to 722 billion rupees from 979 billion rupees a year earlier. Net losses for individual traders stood at 917 billion rupees, while the total number of individual traders fell below 8 million, down from 9.8 million. Concurrently, foreign portfolio investors posted a gross profit of 139 billion rupees during the year, decreasing from 310.9 billion rupees in the preceding year.
These figures illustrate the direct impact of regulatory measures introduced by SEBI in late 2024. The rules were designed to rein in speculative trading that previously positioned India as the world's largest derivatives market by volume. The data also underscores the ongoing divide between sophisticated institutional participants and retail investors, even as retail losses narrowed.
Retail traders have now recorded losses for five consecutive years despite regulatory safeguards. SEBI has progressively increased contract sizes and tightened position limits, while the central bank has imposed stricter funding rules for proprietary traders and stock brokers.
These combined interventions have successfully cooled market activity. SEBI data indicates that the number of individual traders decreased by approximately 2 million in fiscal 2026. Furthermore, the average daily notional turnover in futures and options on the National Stock Exchange of India Ltd. (NSE) fell to a 17-month low in July.
The regulator noted that aggregate losses incurred by individual traders were broadly matched by the profits of corporate and institutional participants. Despite the decline in participant numbers, individuals accounted for nearly 31% of equity derivatives trading, an increase from 26% in the previous year, according to NSE data.
SEBI highlighted that a select group of highly active proprietary trading firms continued to support liquidity within India's derivatives segment. These firms contributed to tighter bid-ask spreads, continuous availability of price quotes, and efficient price discovery, particularly within the options market.
"The latest SEBI data highlights a clear cooling effect in India's retail derivatives market following recent regulatory interventions. While a drop in proprietary trading profits and a reduction in retail participation point to a more controlled speculative environment, the persistent losses among individual traders emphasize the ongoing need for financial awareness and risk management. Institutional liquidity continues to anchor the market, but sustainable retail participation will depend heavily on structured education and measured policy safeguards." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
