SEBI Sees Shift Towards Long-Term Investing As Delivery-Based Trading Rises

Indian equity markets witnessed stronger investor preference for ownership-based investing over short-term trading during FY2025-26, according to the Securities and Exchange Board of India’s (SEBI) latest annual report.

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The regulator said higher delivery ratios across cash market transactions indicate that market participation is becoming more investment-oriented, supported by sustained domestic institutional inflows and regulatory measures aimed at reducing speculative activity.

The trend emerged despite moderation in overall cash market turnover, reflecting changing investor behaviour rather than a decline in market participation.

Delivery Ratios Improve Across Cash Market

SEBI reported that the delivery-to-traded quantity ratio across the National Securities Clearing Corporation (NCL) and Indian Clearing Corporation Ltd. (ICCL) increased to 29.3% during FY26 from 23.6% in the previous financial year.

Similarly, the delivery-to-traded value ratio rose to 27.4%, compared with 24.4% a year earlier. According to the regulator, the increase suggests that a larger proportion of trades resulted in actual ownership transfers instead of being squared off during the trading session.

Overall cash equity turnover declined 6.8% to ₹280 lakh crore during the year. SEBI attributed the moderation to elevated market valuations and a partial shift in retail investments towards gold price and silver price-linked assets. Even so, demat accounts continued to grow, reaching 22.5 crore, reflecting wider participation through digital account opening.

Regulatory Measures Reshape Derivatives Market

The derivatives segment presented a different trend. Combined notional turnover increased 4.3% to ₹1,10,418 lakh crore, while options contract volumes declined 51.5% during the year.

SEBI explained that the reduction in contract volumes followed regulatory changes that increased contract sizes, rationalised weekly expiry schedules, mandated upfront premium collection and raised the securities transaction tax. With each contract representing a larger exposure, fewer contracts were traded even though the overall rupee value of transactions remained resilient.

The regulator said these measures were introduced to make derivatives trading more orderly and risk-aware while preserving its role in hedging, liquidity and price discovery. Additional safeguards included intraday position-limit monitoring and restricting weekly options to one benchmark index per exchange.

Institutional Flows Strengthen Market Ownership

The revised derivatives framework also changed trading patterns across benchmark indices. Nifty 50 accounted for 93.1% of NSE index options turnover in FY26, compared with 45.4% a year earlier. Bank Nifty’s share declined to 6% from 34.8% as weekly options activity consolidated under the revised rules.

Domestic institutional investors continued to provide strong support to the equity market. According to SEBI, DIIs recorded net inflows of ₹8.5 lakh crore, offsetting foreign portfolio investor equity outflows of ₹1.8 lakh crore. Mutual funds contributed ₹6.4 lakh crore, supported by steady systematic investment plan inflows.

Ownership Trend Gains Momentum

SEBI’s report also showed domestic institutional ownership in the NSE-listed universe reached a record 17%, while FPI ownership declined to 15.8%, the lowest level in 15 years.

Taken together, the regulator said the higher delivery ratios, disciplined derivatives activity and continued domestic institutional participation indicate that India’s equity market is becoming increasingly driven by long-term ownership rather than short-term intraday speculation.