Indian Markets Show Shift Towards Long-Term Ownership In FY26: SEBI

Indian equity markets moved towards longer-term ownership over speculative trading in FY 2025-26, according to the Securities and Exchange Board of India's latest annual report.

The quality of market participation improved during the year, with delivery-to-traded quantity and value ratios rising to around 30%. SEBI said this "indicates a growing preference for asset ownership over speculative intraday activities."

Data from clearing corporations reflected this trend. The ratio of delivery-to-traded quantity across the National Clearing Corporation Limited (NCL) and Indian Clearing Corporation Limited (ICCL) climbed to 29.3% from 23.6% in the previous year, while delivery-to-traded value rose to 27.4% from 24.4%. "The rise in delivery share highlights a growing preference for ownership transfers over intra-day activity," the report stated.

This shift occurred even as overall cash equity turnover moderated by 6.8% to ₹280 lakh crore. SEBI attributed the slowdown to valuation concerns and a partial move of retail savings towards gold and silver. Demat accounts, however, continued to expand, reaching 22.5 crore, reflecting broader participation through simplified digital onboarding.

Derivatives Volumes Fall Sharply

The equity derivatives segment showed a contrasting pattern. Combined notional turnover edged up 4.3% to ₹1,10,418 lakh crore, even as total options contract volumes plunged 51.5% during the same period.

SEBI explained that this apparent gap was not contradictory. The regulator had raised contract sizes during the year, meaning each contract now represented a larger portion of the underlying index or stock. As a result, fewer but larger contracts changed hands, which kept the rupee value of trading steady even as the total number of contracts fell sharply.

SEBI attributed the drop in contract volumes primarily to its own regulatory interventions, including higher contract sizes, rationalised weekly expiries, mandatory upfront premium collection and an increase in the securities transaction tax. These measures were aimed at curbing excessive retail speculation and reducing hyperactivity around options expiry days.

The regulator described these as calibrated measures "to make derivatives markets more orderly, resilient and risk-aware," while preserving their role in hedging, liquidity and price discovery. Additional safeguards introduced during the year included intraday position-limit monitoring and a rule restricting weekly options trading to a single benchmark index per exchange.

The impact of the single-index rule was visible in trading data. Nifty 50's share of NSE index options turnover surged to 93.1% in FY26, up from 45.4% a year earlier. Bank Nifty's share, in contrast, fell sharply to 6% from 34.8%, as weekly trading activity consolidated around the single benchmark index each exchange is now permitted to offer.

Domestic Institutions Strengthen Ownership

Domestic institutional investors (DIIs) reinforced the shift towards ownership-driven participation. DIIs recorded net inflows of ₹8.5 lakh crore during the year, more than offsetting foreign portfolio investor (FPI) equity outflows of ₹1.8 lakh crore. Mutual funds alone contributed ₹6.4 lakh crore of these inflows, driven by steady systematic investment plan (SIP) contributions.

As a result, DII ownership in the NSE-listed universe touched an all-time high of 17%, while FPI ownership fell to a 15-year low of 15.8%.

SEBI said the combination of rising delivery ratios, cooling derivatives volumes following regulatory tightening, and stronger domestic institutional support pointed to a more durable market structure, with participation becoming less dominated by short-term intraday speculation.