India's futures and options market is attracting an increasingly younger generation of investors, with Gen Z and other traders below the age of 30 accounting for 43% of individual derivatives participants in FY26, according to a study by capital markets regulator Sebi.
The figure is a significant increase from 31% four years ago and reflects the fast changes in the demographic profile of India’s retail derivatives market.
Younger investors’ increased participation in digital trading and the increased awareness of financial markets are features of the market, but the Sebi findings also reveal another worrying trend. In many cases, young traders are losing money while trading derivatives.
89% of traders below 30 made losses
According to the Sebi study, approximately 89% of individual F&O traders below the age of 30 suffered losses in FY26.
The problem is not limited to younger investors. According to the data, about 81% of derivatives traders aged 60 and above also had losses during the same period.
These figures illustrate the risks of futures and options trading, especially if you have relatively little experience with leveraged financial instruments.
Derivatives, unlike conventional equity investing, can give traders much bigger gains or losses in a very short time. Market movements, leverage, time decay and volatility can have a huge impact on trading results.
Sebi has repeatedly warned retail investors about the risks of derivatives and advised inexperienced participants to be very careful about doing so.
Lower-Income Investors Account For Major Losses
The Sebi study also indicates a major change in the economic profile of India's derivatives participants.
Around three-fourths of individual F&O traders belonged to the annual income category below Rs 5 lakh. These traders represented about 43% of total derivatives turnover in FY26 but contributed a much larger 53% of total losses.
The loss-making rate was particularly high amongst this group. Almost 88% of traders earning less than Rs 5 lakh annually ended the year with losses from derivatives trading.
Even among investors earning more than Rs 1 crore annually, about 81 percent were found to be loss-making. This suggests that a higher income does not necessarily eliminate the risks of speculative derivatives trading.
Smaller Cities Drive F&O Participation
The geographical profile of India's F&O market is also changing rapidly.
Investors from Beyond 30 (B30) locations—that’s towns and cities outside India’s 30 largest urban centres—accounted for about 66% of individual derivatives traders and nearly half of F&O turnover in FY26.
The growing number of small town investors is representative of the wider expansion of digital financial services. Mobile trading, easier opening of accounts and access to the internet have made stock-market participation available to people across the country.
And the growth of leveraged trading comes at the risk of new players not being aware of the risks.
Investors from B30 locations make up about 25% of individual mutual fund assets, and their much higher participation in derivatives is especially notable.
Why F&O Trading Can Be Risky
Futures and options enable traders to take positions with relatively small amounts of capital compared to the underlying asset value. That can increase potential returns for some, but it can also make losses worse.
The risk for options traders also comes from factors beyond the direction of the underlying asset: time decay and implied volatility. Futures traders, too, can suffer a major mark-to-market loss when markets are moving against their positions.
Predicting poor decision-making is also a key factor for novice investors, and high trading costs and poor decision-making will only compound.
Sebi's Warning For Retail Traders
The findings reinforce Sebi’s long-standing concerns about the participation of inexperienced retail investors in derivatives markets.
The regulator's data suggest that the rapid growth in the number of individual F&O traders has not translated into better outcomes for most participants. Young investors, lower-income households and participants from smaller cities are more exposed to a part of the market where losses can accumulate quickly.
And so the changing investor profile does not mean that Gen Z or smaller-city investors should ignore financial markets. But understanding risk, avoiding excessive leverage and distinguishing long-term investing from short-term speculation are key.
The Sebi study ultimately highlights a key challenge for India’s rapidly evolving retail investment space: As market access increases, millions of prospective participants will be lured into sophisticated financial products but bad knowledge and risk management can lead to big losses.
For young investors particularly, the temptation to make quick profits in F&O trading needs to be balanced against the reality that derivatives are complex, leveraged instruments where the majority of individual traders have historically struggled to make consistent profits.
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