India's equity options market is catching up with the cash equity segment, with derivatives accounting for around 70% of Indian exchanges' operating revenues in FY26, according to a latest report by Jefferies.
Key Highlights
- Equity options now account for approximately 70% of Indian exchanges' operating revenues in FY26, per Jefferies.
- SEBI found nine out of ten individual traders lost money in futures and options trading.
The foreign brokerage said the average daily options premium turnover (ADTO) stood at around Rs 77,200 crore in FY26 — nearly 70% of daily cash market turnover. The equity options market grew at a compound annual growth rate (CAGR) of 56% between FY20 and FY26, sharply outpacing the 19% CAGR in cash market turnover over the same period. "Hence, derivatives accounted for approximately 70% of operating revenues for Indian exchanges," Jefferies said.
What's Driving the Growth
The brokerage attributed this rapid expansion to the rise of digital broking platforms like Groww, Zerodha, and Angel One, the introduction of short-dated weekly index options, and cash leverage being limited to 5x. Jefferies noted that this shift has fundamentally altered the revenue profile of exchanges, making earnings more closely tied to market volatility than to stock prices, effectively breaking down the traditional linkage between exchange revenues and market performance cycles.
Exchanges Post Rs 24,400 Crore in Consolidated Revenue
Indian exchanges generated consolidated revenues of Rs 24,400 crore in FY26, with the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and Multi Commodity Exchange (MCX) accounting for 97% of the industry's revenue. Among the three, NSE remains the most diversified exchange, offering equity cash, index options, single-stock options, equity futures, commodity derivatives, bonds, and currency derivatives. According to Jefferies, NSE commands more than 90% market share across most segments except index options and commodity futures and options, while its clearing arm, NCL, holds an 88% share in the cash market and a 91% share in the futures and options segment.
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Regulatory Scrutiny on Retail Losses
The surge in options trading has drawn increased regulatory scrutiny. Jefferies noted, "SEBI has introduced several measures since November 2024, including limiting index option expiries to one per exchange, increasing contract sizes, tightening position limit monitoring, imposing additional margin requirements for short expiries, and strengthening surveillance. Following these changes, NSE shifted Bank Nifty, Midcap Nifty, and Fin Nifty contracts to monthly expiries, causing index options ADTO growth to slow to 8% in FY26."
Despite concerns over the size of India's derivatives market, Jefferies pointed out that while India trades four to five times more option contracts than the US, its options premium turnover is only around one-figth of the US market - highlighting a structural difference in contract sizing and pricing between the two markets.
The report also found that small traders account for a limited share of trading activity. While traders with less than Rs 1 lakh turnover represent around 35% of options traders, they contribute less than 1% of NSE's options turnover — a share that has declined from 45% in FY25 to 35% following SEBI's regulatory changes.
Nine in Ten Individual Traders Lose Money
In a recent study, Securities and Exchange Board of India found that nine out of ten individual traders incurred losses in the futures and options segment. Between December 2024 and May 2025, individual traders lost Rs 1.05 lakh crore in the equity derivatives segment - up 41% from Rs 74,812 crore in FY24 - with the average loss per trader standing at Rs 1.10 lakh.
Growth Outlook
Citing NSE's draft red herring prospectus (DRHP), Jefferies projects equity options to grow at a relatively modest 9-11% CAGR between FY26 and FY30, compared with 14-16% growth for cash equities and 20-25% for commodity options - suggesting the explosive growth phase of India's options market may be starting to moderate.
