93% of Individual Traders Lost Rs1.8 Lakh Crore in Equity F&O in Past 3 Years: SEBI

Moneylife Digital Team 23 September 2024

Investor Interest

Nine out of 10 individual traders in the equity futures and options (F&O) segment continue to incur significant losses and the aggregate losses of individual traders exceeded Rs1.8 lakh crore over the past three years till FY23-24, reveals a study conducted by market regulator Securities & Exchange Board of India (SEBI).

This study follows up on a report by SEBI in January 2023 which found that 89% of individual equity F&O traders lost money in FY21-22. "With the increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyze profit and loss patterns for individual traders in F&O during the three years FY21-22 to FY23-24, and for all the categories of investors in F&O during the single year FY23-24," SEBI says.

Here are the key findings of the SEBI study...

1. High Loss Rates among Individual Traders

93% of over 10mn (million) individual F&O traders incurred average losses of around Rs2 lakh per trader, inclusive of transaction costs, during the three years from FY21-22 to FY23-24.
Top 3.5% of loss-makers, about 400,000 traders, faced an average loss of Rs28 lakh per person over the same period, inclusive of transaction costs.
Only 1% of individual traders managed to earn profits exceeding Rs1 lakh, after adjusting for transaction costs.

2. Profit Distribution among Proprietary Traders and FPIs

In contrast to individual traders, proprietary traders and foreign portfolio investors (FPIs) as a class booked gross trading profits of Rs33,000 crore and Rs28,000 crore, respectively, in FY23-24 before accounting for transaction costs. Against this, individuals and others incurred a loss of over Rs61,000 crore in FY23-24 before accounting for transaction costs.
Most of the profits were generated by larger entities that used trading algorithms, with 97% of FPI profits and 96% of proprietary trader profits coming from algorithmic trading.

3. Transaction Costs for Individual Traders

On an average, individual traders spent Rs26,000 per person on F&O transaction costs in FY23-24.
Over the three-year period from FY21-22 to FY23-24, individuals collectively spent about Rs50,000 crore on transaction costs, with 51% of these costs being brokerage fees and 20% being exchange fees.

4. Increasing Participation of Young and B30 City Traders

The proportion of young traders (below 30 years) in the F&O segment rose from 31% in FY22-23 to 43% in FY23-24.
Individuals from beyond top-30 (B30) cities made up over 72% of the total F&O trader base, a higher proportion compared to mutual fund investors, 62% of whom are from B30 cities.

5. Income Profiles of Traders

Over 75% of individual F&O traders in FY23-24 had declared an annual income of less than Rs5 lakh.

6. Trading Behavior and Persistence

Despite consecutive years of losses, more than 75% of loss-making traders continued trading in F&O.

Comments

User

spa

1 year ago

Tragic tale of present times. Absence of opportunities to meet aspirations and bind eye of policy makers, luring young people to stock market for making quick money.

Vivek Shah

1 year ago

Individual traders are drawn to making quick money
but end up making phenomenal losses. These suckers don't realise that markets are for investing not trading.