Decoding India's Equity Derivatives: What the Latest Statistics Reveal

SANTANU BEZ

https://www.sebi.gov.in/reports-and-statistics/research/jul-2025/comparative-study-of-growth-in-equity-derivatives-segment-vis-vis-cash-market-after-recent-measures_95105.html

Decoding India's Equity Derivatives: What the Latest Statistics Reveal

The Indian Equity Derivatives Segment (EDS) has evolved into a powerhouse of activity, particularly in index options, drawing traders and speculators with its promise of leverage and rapid movement. Yet, beneath the growth lies a complex story of shifting participation, regulatory changes, and persistent risks.

Let’s break down what recent SEBI data and systematic statistical analysis reveal about the state of India's EDS.

Long-Term Growth: Derivatives vs. Cash Market

From FY20 to FY25:

EDS turnover grew at 23% CAGR, closely tracking the Cash Market’s 25% CAGR.
Index Options (premium terms) grew at 72% CAGR, reflecting explosive speculative interest.
Index Options (notional terms) grew at 101% CAGR, emphasizing high turnover despite tighter regulations.

Insight: Derivatives are not slowing down; if anything, they remain the engine room of India’s trading activity, particularly in the options space.

Recent Trends: The Regulatory Impact

Between Dec 2024 – May 2025:

EDS turnover fell 5% YoY but remains 46% higher than two years ago.
Cash Market turnover fell 11% YoY yet is 91% higher compared to two years back.
Index Options turnover dipped 9% (premium) and 29% (notional) YoY, indicating the impact of measures like increased contract sizes, upfront premium collection, and expiry rationalization.

Takeaway: Regulatory tightening is reining in hyper-speculative volumes without crushing the underlying growth trajectory.

Who Is Trading? Participation Patterns

SEBI data shows:

20% decline YoY in unique individual traders in EDS, despite a 24% increase over two years.
Smaller traders (<₹10,000 buckets) saw the steepest decline (30% YoY), while their numbers remain 57% higher than two years ago.
91% of traders continue to lose money, with average losses per trader increasing by 27% YoY.

Reality Check: High participation does not equal high profitability; risk management and education are non-negotiable for survival in derivatives.

Here is a statistical analysis of uploaded SEBI report (“Comparative study of growth in Equity Derivatives Segment vis-à-vis Cash Market after recent measures”) in a concise, actionable, and insight-focused manner:

1️⃣ Context Recap

Recent measures (Nov 2024–Apr 2025) were taken to reduce systemic risks in index derivatives, including:
- Upfront premium collection
- Rationalization of weekly/monthly expiries
- Increase in contract sizes
- Intraday monitoring of position limits.
Analysis covers Dec 2024 – May 2025 post-measures vs:
- Dec 2023 – May 2024 (1-year comparison)
- Dec 2022 – May 2023 (2-year comparison)
Focus areas:
- Turnover growth/decline
- Individual trader participation
- Profit/loss statistics.

2️⃣ Market Turnover Growth

Segment	FY20-FY25 CAGR
EDS (all)	23%
Cash Market	25%

Index options (premium terms): 72% CAGR
Stock options (premium terms): 54% CAGR
Index options (notional terms): 101% CAGR

Implication: Options trading grew far faster than cash markets, particularly in index options (reflecting increased speculative activity).

3️⃣ Recent 6-Month Turnover Change

EDS (Dec 24–May 25):

Down 5% YoY
Up 46% vs 2 years ago

CM (Dec 24–May 25):

Down 11% YoY
Up 91% vs 2 years ago

Index Options (Premium):

Down 9% YoY
Up 14% vs 2 years ago

Index Options (Notional):

Down 29% YoY
Up 42% vs 2 years ago

4️⃣ Participation Statistics

Unique Individual Traders:

Down 20% YoY
Up 24% vs 2 years ago

By Buckets:

Bucket	YoY Change	2-Year Change
< ₹10K	-30%	+57%
₹10K-1L	-22%	+33%
₹1L-10L	-24%	+11%
₹10L-1Cr	-14%	+13%
₹1Cr-10Cr	-4%	+26%
> ₹10Cr	-11%	+24%

Implication: Small-ticket traders saw the highest drop YoY but the highest increase in 2 years, showing volatility in retail participation.

5️⃣ Profit & Loss Analysis of Individuals

91% of traders incurred losses in FY25, consistent with FY24.
Net individual trader losses increased 41% YoY:
- FY24: ₹74,812 Cr
- FY25: ₹1,05,603 Cr
Average per-person loss:
- FY24: -₹86,728
- FY25: -₹1,10,069 (up 27% YoY)

Quarterly Trend (FY25):

Quarter	Net Loss (₹ Cr)	Avg. Loss Per Person
Q1	-21,255	-34,606
Q2	-25,942	-43,847
Q3	-33,661	-62,975
Q4	-24,745	-57,920

Implication:

Losses rose during Q1–Q3, with a slight reduction in Q4.
Despite reduced participation in Q4, aggregate losses remained high.

6️⃣ Key Statistical Insights

Market Stability vs. Participation:

Measures led to deceleration in growth in derivatives volume YoY.
Participation by smaller traders dropped sharply, indicating risk control effectiveness.
Yet, high systemic activity remains, with India holding the #1 position globally in contract volumes.

Loss Distribution:

Persistent high loss rates (~91%) reflect the asymmetric risk-reward profile in options markets.
Losses per person are increasing despite reduced participation, suggesting higher position sizes, volatility, or mismanagement of risk.

Segmental Growth:

While cash markets outperformed derivatives YoY, long-term momentum still favors derivatives, especially index options.

Actionable Statistical Takeaways

For traders, these statistics highlight the importance of risk management, position sizing, and volatility assessment before engaging in derivatives.

For regulators, the measures are containing explosive growth but systemic speculative interest remains strong.

For strategic planning:

Monitor retail participation volatility as it correlates with risk events.
Track index options premium turnover as a barometer of speculative market sentiment.
Use loss distribution statistics to guide educational interventions for retail participants.

️ Key Lessons for Traders and Policymakers
The EDS is structurally strong but prone to speculation-fueled volatility.
Regulatory measures are essential to stabilize participation without killing growth.
The high loss ratio among retail traders calls for greater risk awareness and disciplined strategy design.
Systematic, data-backed analysis provides the only sustainable edge in such fast-evolving markets.

️ Final Thoughts

If you are trading or studying India’s equity derivatives, don’t get lost in the noise. Leverage structured analysis, understand segment-wise trends, and respect risk.

Derivatives are powerful tools—but without discipline, they are equally powerful destroyers of capital.

SANTANU BEZ

Timeline and Key Actors in India’s Equity Derivatives Landscape (FY20–FY25)

I. Introduction

Over the past five years, India’s Equity Derivatives Segment (EDS) has witnessed explosive growth, shifting retail participation dynamics, structural changes, and regulatory interventions by SEBI to strengthen market resilience and protect retail investors. Below is a clear, year-wise timeline with key figures, followed by a “Cast of Characters” for context clarity.

II. Detailed Timeline of Events

Fiscal Year 2019-2020 (FY20)

Early FY20: Only ₹5 of every ₹100 traded by individuals in EDS went into index options.

Fiscal Year 2020-2021 (FY21)

Cash Market (CM) average daily traded value grew at a CAGR of 25% (FY20-FY25).
EDS grew at a CAGR of 23% in the same period.
Within EDS:
- Index options premium traded CAGR: 72% (FY20-FY25).
- Index options notional traded CAGR: 101% (FY20-FY25).

Fiscal Year 2021-2022 (FY22)

Individual traders in EDS:
- Net loss: ₹40,824 crore.
- Loss makers: 90.2%.
- Average per-person loss: ₹95,517.

Fiscal Year 2022-2023 (FY23)

Individual traders in EDS:
- Net loss: ₹65,747 crore.
- Loss makers: 91.7%.
- Average per-person loss: ₹1,12,677.
Dec 2022 – May 2023:
- EDS avg daily traded: ₹1,66,730 crore.
- CM avg daily traded: ₹55,366 crore.
- Index options premium traded: ₹54,086 crore/day.
- Index options notional: ₹2,24,69,205 crore/day.
- Individual investors in EDS traded: ₹41,272 crore/day.
- Total unique EDS traders: 54,84,990.
- Individuals trading in EDS: 54,68,988.

Fiscal Year 2023-2024 (FY24)

Individual traders in EDS:
- Net loss: ₹74,812 crore.
- Loss makers: 91.1%.
- Average per-person loss: ₹86,728.
Dec 2023 – May 2024:
- EDS avg daily traded: ₹2,55,206 crore.
- CM avg daily traded: ₹1,18,190 crore.
- Index options premium traded: ₹67,467 crore/day.
- Index options notional: ₹4,48,42,314 crore/day.
- Individual investors in EDS traded: ₹62,722 crore/day.
- Total unique EDS traders: 84,25,284.
- Individuals trading in EDS: 84,06,551.
Sep 23, 2024: SEBI published its previous study on P&L in EDS.

Fiscal Year 2024-2025 (FY25)

Key Regulatory Interventions:

Oct 1, 2024: Measures to strengthen equity index derivatives framework.
Nov 20, 2024: Weekly index derivatives rationalization; tail risk coverage on expiry day.
Jan 2025: Monthly derivatives rationalization; single expiry day for exchanges.
Jan 02 & 10, 2025: Increased minimum contract sizes on NSE & BSE.
Feb 10, 2025: Upfront premium collection & expiry day spread removal.
Mar 28, 2025: Intraday breach exemptions for index derivatives.
Apr 01, 2025: Intraday monitoring of position limits.
Mar 2025: India ranked #1 globally in contracts traded (4.3x higher than 2nd rank).
May 29, 2025: SEBI introduced measures for:
- Enhanced risk monitoring and disclosure.
- Reduction of spurious F&O bans.
- Oversight of concentration/manipulation risk in index options.

Quarter-wise FY25 Retail Data:

Q1: 61.4 lakh traders, ₹21,255 crore net loss, 84.5% loss makers.
Q2: 59.2 lakh traders, ₹25,942 crore net loss, 86.3% loss makers.
Q3: 53.5 lakh traders, ₹33,661 crore net loss, 88.5% loss makers.
Q4: 42.7 lakh traders, ₹24,745 crore net loss, 86.4% loss makers.

Full Year FY25:

Net loss: ₹1,05,603 crore.
Loss makers: 91%.
Average per-person loss: ₹1,10,069.
Index options share in individual EDS trades: ₹41 out of every ₹100 (up from ₹5 in FY20).

Dec 2024 – May 2025: Performance Trends

Metric	% Change YoY	% Change in 2 Years
EDS Avg Daily Value	-5%	+46%
CM Avg Daily Value	-11%	+91%
Index Options Premium	-9%	+14%
Index Options Notional	-29%	+42%
Retail EDS Value	-11%	+36%
Unique EDS Traders	-20%	+24%

III. Cast of Characters

SEBI: India’s securities market regulator, enforcing stability and investor protection in derivatives.
Individual Traders: Retail participants and HUFs, the core focus of profitability and participation studies.
Top 13 Brokers: Largest brokerages (96 lakh traders), forming the sample universe for SEBI’s studies.
NSE & BSE: India’s primary exchanges, executing contract size and expiry rationalizations.
MSE: Implemented Friday expiry for its index derivatives.
World Federation of Exchanges: Data source for global ranking, showing India’s lead in contracts traded.

IV. Closing Notes

This structured timeline helps decode how explosive retail participation in index options led to increasing retail losses despite market volume growth, prompting SEBI’s tightening measures to protect individuals while ensuring derivatives remain a useful tool for hedging, not just speculative gambling.

For traders, controlled strategies such as Short Straddles with well-defined stop-losses and margin management can offer leveraged yet contained risk structures, contrasting with retail patterns of excessive option buying without hedges.