The Securities Exchange Board of India (SEBI) said that 9 out of 10 individual traders have suffered losses in the equity futures and options (F&O) segment. Market regulator SEBI has given this information in one of its latest analysis reports.
SEBI said in the report that in the three-year time period between financial year 22 and financial year 24, 93% of the more than 1 crore F&O traders have suffered a total loss of Rs 1.8 lakh crore. That is, out of about 93 lakh traders, every trader has suffered an average loss of about Rs 2 lakh (including transaction cost).
Investor participation increased in equity and equity derivative markets SEBI's latest report said, 'The participation of individual investors in equity and equity derivatives markets has increased. Hence this study was conducted to analyse the profit and loss pattern of individual traders in F&O during FY22 to FY24 and for all categories.'
89% of individual equity F&O traders suffered losses in FY22 Earlier, SEBI had published a study in January 2023. Then SEBI had told that 89% of individual equity F&O traders had suffered losses in financial year-22.
Analysis report of Securities Exchange Board of India (SEBI) on F&O segment.
Highlights of SEBI's study –
- The top 3.5% of losers, or about 4 lakh traders, suffered an average loss of Rs 28 lakh per person between FY22-FY24, which also includes transaction costs.
- After adjusting for transaction costs, only 1% of individual traders have been successful in making profits of more than Rs 1 lakh.
- Proprietary traders and FPIs, as a category, recorded gross trading profits of Rs 33,000 crore and Rs 28,000 crore in FY24.
- Individual traders and others suffered losses of more than Rs 61,000 crore in financial year-24.
- Most of the profits were generated by large entities that used trading algorithms, with 97% of FPI profits and 96% of proprietary traders' profits coming from algorithmic trading.
- Most individual traders did not make money in the F&O segment. They spent an average of Rs 26,000 per person on F&O transaction costs in FY24.
- In the three years from FY22 to FY24, traders spent around Rs 50,000 crore on transaction costs, which included 51% on brokerage fees and 20% on exchange fees.
- In terms of age, the ratio of young traders (below 30 years) in the F&O segment increased from 31% in FY23 to 43% in FY24.
- Traders from Beyond Top 30 (B30) cities accounted for over 72% of the total F&O trader base. This is more than mutual fund investors.
- Talking about the income profiles of traders, in FY24, more than 75% of individual F&O traders declared annual income of less than Rs 5 lakh.
- Talking about trading behaviour and persistence, despite losses for several consecutive years, more than 75% of the loss-making traders have continued trading in F&O.
What are futures and options? Futures and Options (F&O) are a type of financial instrument that allows an investor to take large positions in stocks, commodities, currencies with a small amount of capital. Futures and options are a type of derivative contract that has a fixed duration.
Within this time frame, their prices change according to the price of the stock. Futures and options of each stock are available in a lot size.
Graphics Source: VaskarAssets
