Nithin Kamath, founder and CEO of Zerodha. AI Quick ReadIndia’s booming derivatives market has long been seen as a symbol of rising retail participation and growing financial awareness. However, fresh insights from Nithin Kamath suggest that the reality may be far more nuanced — and significantly smaller — than popular perception.
Despite widespread concerns around speculative activity in futures and options (F&O), Kamath pointed out that participation remains limited relative to the overall investor base. His observations come at a time when the Securities and Exchange Board of India (Sebi) has been actively taking steps to curb excessive speculation in derivatives markets.
“Despite what people think about F&O trading in India and all its problems, it is still a very, very small market compared to almost anything else. In fact, in the month of March, only about 30 lakh people traded an F&O contract. Across FY26 as a whole, only about 20 lakh people traded only in F&O. If you combine people who traded in equities and F&O, that number goes up to roughly 64 lakh,” Kamath said in a recent post on social media platform X.
Kamath’s data highlights a striking gap between perception and reality. Out of nearly 13 crore unique investors in India, only around 3.8 crore were active across segments such as equities and F&O.
“So this is still a very small market. Altogether, out of nearly 13 crore unique investors, only around 3.8 crore investors were active across cash and F&O. That means only about 30% of investors traded anything at all,” Zerodha CEO's tweet added.
The numbers point to a deeper structural issue — while the investor base has expanded significantly in recent years, actual trading activity remains concentrated among a smaller group.
“And yet, the only reason broker revenues have held up is that a small number of people are trading more. Pretty much the entire revenue pool of the broking industry comes from this relatively small pool of traders,” Kamath added.
Perhaps the most striking takeaway is the skew in trading volumes. According to Kamath, nearly 60–70% of F&O turnover is generated by just 1–2% of traders. This indicates that while millions may have entered the markets, the intensity of trading — and the resulting impact on market volumes — is driven by a very narrow segment.
This concentration also explains why brokerage revenues remain strong despite relatively low overall participation. A small set of highly active traders continues to account for a disproportionate share of transactions.
Kamath’s observations suggest that India’s derivatives market, while growing, is still evolving and far from being as broad-based as it is often perceived. The data also reinforces the need for cautious participation, especially as regulators continue to tighten norms around speculative trading.
In essence, while the headline numbers around investor growth paint an encouraging picture, the underlying structure reveals a market where activity — and risk — is heavily concentrated among a few.
F&O trading stands for Futures and Options trading, a segment of the stock market where traders bet on the future price of an asset like stocks, indices, or commodities.
A future is a contract to buy or sell an asset at a fixed price on a future date. An option gives the right (but not the obligation) to buy or sell at a predetermined price before a certain date.
Unlike regular investing, F&O is mostly used for short-term trading, hedging, or speculation. It allows traders to take larger positions with a smaller amount of money through leverage.
While it can offer high returns, F&O trading is also high risk, as losses can be significant if the market moves against the position.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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