India’s derivatives market has exploded in recent years, drawing in millions of eager retail traders chasing quick profits through futures and options trading. These contracts, where two parties agree to trade a stock at a set price on a future date, have fuelled a frenzy of speculation. In April 2025, India accounted for nearly 60 per cent of the 7.3 billion equity derivatives traded globally. But a recent study by the Securities and Exchange Board of India (SEBI) reveals a grim truth—91 per cent of individual traders lost money in the equity derivatives segment in the financial year ending March 2025.
The derivatives market has grown at a breakneck pace, with the average daily turnover soaring from Rs92,724 crore in 2019-20 to Rs02.64 lakh crore in 2024-25—a 23 per cent compounded annual growth rate. Many factors contributed to this surge. The Covid-19 lockdown left many with extra time and savings, prompting them to try their hand at trading. User-friendly apps, low-cost trading plans from discount brokers, and mobile trading tools made it easier than ever to jump in. Social media and financial influencers further hyped the market, turning trading into a cultural phenomenon.
But the excitement masks a harsh reality. SEBI’s data, which tracks trading from 2021-22, shows that nine out of 10 individual traders lose money. Total losses have climbed from 040,824 crore in 2022 to Rs1.06 lakh crore in 2025.
The scale of retail losses stands in stark contrast to the massive profits made by some institutional players. SEBI’s recent investigation into Jane Street, a Wall Street trading giant, has spotlighted a troubling imbalance in the market. In July 2024, SEBI accused Jane Street of manipulating stock indices through its derivatives trades, allegedly raking in unlawful gains of more than Rs4,843 crore. In an interim order, the regulator has banned Jane Street and its associated entities from India’s securities market and ordered the impoundment of these profits.
Jane Street, which reported $20.5 billion in net trading revenue in 2024, is a major player in global markets. SEBI alleges that Jane Street would buy large quantities of Bank Nifty index components in the cash and futures markets in the morning while taking short positions in index options. Later in the day, it would reverse these trades, selling what it bought and profiting from the options positions. SEBI says this tactic caused abnormal volatility, particularly on weekly index options expiry days, misleading retail traders and contributing to their losses. In total, Jane Street allegedly made Rs36,502 crore in profits through these trades.
Jane Street has denied the charges, vowing to engage with SEBI and comply with regulations. It has complied with the interim order and deposited Rs4,843 crore in an escrow account. The firm is expected to challenge the order legally, but the case has raised broader concerns. “The Jane Street case shows how massive trades can shift indices and trigger expiry-day moves, misleading retail participants,” said Trivesh D., chief operating officer of trading platform Tradejini. He said 97 per cent of foreign portfolio investor profits and 96 per cent of proprietary trading profits in 2024 came from algorithm-driven strategies, leaving retail traders at a disadvantage.
Retail traders face a structural disadvantage in the derivatives market. Unlike institutional players like Jane Street, who use high-speed algorithms and advanced execution systems and have access to real-time data, most individual traders rely on basic tools like index trends or simple charting. “It’s like David versus Goliath,” said Manish Jain, chief strategy officer at Mirae Asset Capital Markets. “Retail traders can’t match the speed and scale of high-frequency trading firms unless they have a large portfolio and positions to hedge.”
The odds are stacked against small investors. Derivatives trading is inherently speculative, and retail traders often lack the disciplined strategies or infrastructure of institutional players. “Retail investors are being gamed,” warned independent market analyst Ajay Bodke. He said SEBI should have acted sooner to protect small investors. “A clear signal needs to be sent that you can’t play havoc with small investors’ money,” he said.
SEBI has taken steps to curb the derivatives frenzy. Over the past year, the regulator introduced measures like reducing weekly expiries per exchange, increasing the minimum trading amount for derivatives, and implementing intraday monitoring of position limits. These changes have had some impact. Trivesh said that after SEBI’s interim order on July 3, 2025, the National Stock Exchange (NSE) saw a 21 per cent drop in derivatives turnover, from Rs605 lakh crore to Rs476 lakh crore. Index options contracts also fell by about 21 per cent.
Despite these efforts, experts doubt whether retail losses will decrease significantly without more drastic measures. Bodke suggests raising the lot size—the minimum number of shares or contracts required to trade—to make derivatives less accessible to small investors. Jain agrees, noting that retail traders should stick to the cash market, where shares are bought and sold for immediate delivery, rather than speculative derivatives. “Barring a few, institutional activities aren’t purely speculative. Retail traders, on the other hand, are mostly speculating and losing,” he said.
Despite the challenges, India’s derivatives market remains a powerhouse. Retail participation has surged from 2 per cent in 2018 to over 40 per cent in 2025. “India’s market opportunity is structural, not cyclical,” said Dinesh Thakkar, chairman of Angel One, a brokerage. He said SEBI’s actions would strengthen market integrity by enforcing stricter compliance and governance, benefiting all players in the long run.
Trivesh echoed this optimism, noting that tighter surveillance could restore trust in the market. However, most experts agreed that retail traders need to rethink their approach. Derivatives trading requires discipline, resources and strategies that most individuals lack. For now, the market remains a high-stakes game where the odds favour the big players.
For retail investors, experts recommend focusing on long-term investments in the cash market or adopting well-defined hedging strategies if derivatives are unavoidable. “Retail investors should refrain from speculative trading unless they’re running a very well-defined strategy,” said Jain.