According to a recent study by the Securities and Exchange Board of India (SEBI), 93% of individual traders in the equity futures and options (F&O) market incurred significant losses between FY22 and FY24. Over this three-year period, the collective losses amounted to more than ₹1.8 lakh crore.
This study builds upon earlier findings from January 2023, where SEBI reported that 89% of individual F&O traders lost money in FY22. The latest analysis highlights the growing participation of individual traders in the equity and derivatives markets and examines their profit and loss patterns.
Key Findings:
1. High Losses for Individual Traders:
Out of over 1 crore individual traders in the F&O segment, 93% faced average losses of ₹2 lakh per person, inclusive of transaction costs.
The top 3.5% of loss-making traders—about 4 lakh people—experienced much higher losses, averaging ₹28 lakh per person.
Only 1% of traders made profits exceeding ₹1 lakh after accounting for transaction costs.
2. Proprietary Traders and FPIs Profited:
While individual traders saw heavy losses, proprietary traders and Foreign Portfolio Investors (FPIs) gained ₹33,000 crore and ₹28,000 crore in FY24, respectively, before transaction costs.
A significant portion of these profits was generated through algorithmic trading, with 97% of FPI profits and 96% of proprietary trader profits coming from automated strategies.
3. Transaction Costs:
Individual traders spent an average of ₹26,000 per person on F&O transaction costs in FY24.
Collectively, over the three-year period from FY22 to FY24, individuals spent around ₹50,000 crore on transaction costs. About 51% of these costs went to brokerage fees, while 20% was paid in exchange fees.
4. Young and B30 City Traders on the Rise:
The share 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 now make up over 72% of the F&O trader base, compared to 62% for mutual fund investors.
5. Income Profiles:
Over 75% of individual F&O traders in FY24 reported annual incomes of less than ₹5 lakh.
Trading Behavior:
Despite continuous losses, more than 75% of loss-making traders continued to trade in F&O, reflecting a persistent belief in the market’s potential for profits.
This SEBI report serves as a cautionary note for individual traders, emphasizing the risks involved in derivatives trading and the need for greater awareness of market dynamics.
