Derivatives Market Gets Gen Z Twist, But Losses Cast A Long Shadow: SEBI

The country's equity derivatives market has taken on a notably younger profile, with traders under 30 making up 43% of individual participants in FY26, a sharp rise from 31% four years earlier, according to a study.

However, the younger cohort also recorded a higher incidence of losses, the study by the Securities and Exchange Board of India (Sebi) revealed.

Around 89% of traders below 30 were loss-makers in FY26 compared to 81% of participants above 60.

The changing age profile is part of a wider transformation in the retail derivatives market, which has increasingly drawn investors outside India's largest cities and from relatively lower-income groups.

About three-fourths of individual derivatives traders belonged to the annual income category of below ₹5 lakh. This group accounted for 43% of turnover, but 53% of aggregate losses, the regulator said.

Around 88% of traders in this income category incurred losses, compared with 81% of investors with annual income of above ₹1 crore.

The geographical spread of derivatives participation has been equally striking.

Investors from smaller towns (B30) accounted for about two-thirds of individual traders and nearly half of derivatives turnover in FY26.

The study noted that B30 investors account for only about one-fourth of individual mutual fund assets, pointing to a markedly higher derivatives risk appetite relative to their broader investment behaviour.

The study also examined the relationship between derivatives trading and the size of investors' underlying equity portfolios.

In FY25-26, around 95 lakh, or 78%, of individual derivatives traders had equity portfolios below ₹1 lakh.

This group accounted for 51% of turnover, but as much as 70% of aggregate losses.

The study also found that traders with equity portfolios below ₹1 lakh, but derivatives turnover above ₹1 crore, represented only 13% of traders, though accounted for 52% of aggregate losses.

Around 43 lakh traders, or 35% of individual derivatives participants during FY25-26, had no underlying equity portfolio at the end of FY26.

This indicated participation in derivatives without any cash-equity holdings.

The study also found that the overall individual trader base contracted 18%, from 1.06 crore in FY25 to 87.5 lakh in FY26.

Sebi's analysis examined how trading outcomes varied with age, income, location, trading activity and portfolio size, while cautioning that these relationships should not be interpreted as proof of causation.