New Delhi: A SEBI (Securities and Exchange Board of India) analysis suggests that nearly 93% of retail traders in the equity derivatives market have incurred losses over the last three years, and an average loss incurred per trader has been around Rs 2 lakh. That translates into a combined loss of Rs 1.8 trillion between FY22 and FY24. Percentage of F&O trading loss-making traders increased to 91.1 percent in FY24, much like it did to 89 percent in FY22, a worrying trend.
It holds despite consecutive losses; about 75% of retail traders continued their trading activities, in fact, contributing to a record average daily turnover of Rs 540 trillion in September 2024, much more than Rs 360 trillion the year before. Nearly all F&O traders are individuals, at 99.8%, but this category accounted for only 30% of total turnover in FY24. Retail traders increased their count from 5.1 million in FY22 to 9.6 million in FY24, indicating a rising but less vibrant participation.
Almost 7.3 million retail traders lost an average of Rs 1.2 lakh each, including transaction costs, while FPIs and proprietary traders registered significant profits, mainly through algorithmic trading in FY24. The lion’s share of these profits is indeed being brought in by large entities using high-end sophisticated trading algorithms; it does raise major concerns over the possibilities of overseas algo traders gaining at the cost of the savings of Indian retail investors. Almost Rs 1.8 trillion of individual losses, which had been accumulating over three years. Net losses were Rs 75,000 crore in FY24. The smallest fraction of this group had losses averaging to Rs 28 lakh each and only 7.2% of the individual traders managed to net profits. Only 1% of them managed to net profits over Rs 1 lakh after adjusting for costs. Over 75 percent of traders have an annual income below Rs 5 lakh and the percentage of traders in the age group below 30 years has increased from 31 percent in FY23 to 43 percent in FY24.
In addition, three-fourths of its investors came from regions outside the top 30 cities, a proportion steeper than that for mutual fund investors. Increased F&O trading by individuals has triggered debates about such products and high investor education and risk management, which SEBI claims to be necessary. The regulator is said to be taking suggestions and ideas on tackling the problem while discussing various measures for curbing retail participation and speculation in the derivatives market when it meets for the board recently.
