A current research by Sebi discovered 88% or 9 out of 10 particular person F&O merchants nonetheless incurred losses in FY26. Choices remained the primary supply of losses. The market regulator mentioned round 92% of mixture losses incurred by particular person merchants got here from options trading.
The market regulator, in addition to the federal government, has been advising traders to tread with warning within the derivatives market, which wiped off huge sums of retail investors’ wealth. This will likely remind traders of what Warren Buffett as soon as mentioned.
Warren Buffett’s warning towards F&O
In his 2002 letter, Buffett referred to as derivatives “time bombs, each for the events that deal in them and the financial system.”
“In our view, nonetheless, derivatives are financial weapons of mass destruction, carrying risks that, whereas now latent, are probably deadly,” he wrote.
Being forward of time, as at all times, the Berkshire Hathaway Chairman wrote within the 2002 letter, “The derivatives genie is now nicely out of the bottle, and these devices will virtually definitely multiply in selection and quantity till some occasion makes their toxicity clear.”
His warnings got here true through the 2008 monetary disaster, when complicated derivatives initially designed to guard banks from deadbeat debtors added to their turmoil. Buffett has reiterated his warnings towards F&O a number of instances.He just lately criticized the present inventory market setting, highlighting that worth investing is really fizzling out as folks favor playing as a substitute. “It’s powerful to seek out values when everyone is preferring playing,” the 95-year-old legendary investor mentioned in an interview to CNBC.
“However since people like to gamble a lot, there’s extra money in really cultivating gamblers than there are cultivating traders,” the Berkshire Hathaway Chairman mentioned.
Additionally learn | Rs 91,685 crore gone! 88% retail investors lost money in F&O trading in FY26 even after strict Sebi rules
Why are Indian regulators sounding the alarm?
After presenting the Union Finances in February this yr, Union Finance Minister Nirmala Sitharaman mentioned that the federal government couldn’t stay silent as speculative ‘satta’ in derivatives inflicts heavy losses on small retail traders.
“We’re touching solely the futures and choices phase. Nobody has elevated transaction prices elsewhere. Hypothesis, what we name ‘satta’ in Hindi, is very dangerous, and many individuals with restricted funds face heavy losses. The nominal improve in STT is aimed purely at deterring extreme hypothesis. We respect market exercise, however the authorities can’t ignore the losses confronted by small traders. This tax is just one factor to assist that coverage. How the remainder of the market is regulated is as much as the market regulator,” Sitharaman mentioned in a press release to the press after her Finances speech.
To curb the derivatives frenzy, the federal government elevated STT on F&O buying and selling. Consequently, some discount in F&O volumes had been observed. As per Sebi’s newest research, particular person merchants posted mixture internet losses of about Rs 91,685 crore in FY26, in contrast with about Rs 1.12 lakh crore in FY25. The autumn in whole losses got here primarily as a result of the variety of energetic particular person merchants declined, not as a result of outcomes improved meaningfully for many who continued buying and selling.
In the meantime, energetic particular person merchants declined about 20% to 78.6 lakh in FY26 from 98.1 lakh in FY25, whereas new entrants dropped about 40%. Common loss per dealer rose marginally to about Rs 1.17 lakh through the yr.
Additionally learn | Losing game! How India’s small F&O traders carried 70% losses while prop desks made Rs 44,000 crore
(Disclaimer: Suggestions, ideas, views and opinions given by the consultants are their very own. These don’t symbolize the views of The Financial Occasions)
