The SEBI analysis found that only 7.2 per cent of individual F&O traders made a profit over the last three years
The latest study by the Securities and Exchange Board of India (SEBI) has revealed that nine out of 10 individual traders in the equity futures and options (F&O) segment incurred significant losses with a combined net loss of Rs 1.81 lakh crore in the last three financial years of FY22-FY24.
“Over 93 per cent of over 1 crore individual F&O traders incurred average losses of around Rs 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24,” the report said.
The top 3.5 per cent of loss-makers, approximately 4 lakh traders, faced an average loss of Rs 28 lakh per person over the same period, inclusive of transaction costs, according to the report.
The SEBI analysis found that only 7.2 per cent of individual F&O traders made a profit over the last three years. However, only one per cent of the individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting transaction costs.
This study comes after a report published by SEBI ins January 2023, which found that 89 per cent of individual equity F&O traders lost money in FY22.
“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 FY22 to FY24, and for all the categories of investors in F&O during the single year FY24,” stated the report by SEBI.
The report also reveals that proprietary traders and foreign portfolio investors (FPIs) as a category booked gross trading profits of Rs 33,000 crore and Rs 28,000 crore respectively in FY24 (before accounting for transaction costs. On the other hand, individuals and others incurred a loss of over Rs 61,000 crore in FY24 (before accounting for transaction costs).
“Most of the profits were generated by larger entities that used trading algorithms, with 97 per cent of FPI profits and 96 per cent of proprietary trader profits coming from algorithmic trading," Sebi's study highlighted.
"On average, individual traders spent Rs 26,000 per person on F&O transaction costs in FY24. Over the three years from FY22 to FY24, individuals collectively spent about Rs 50,000 crore on transaction costs, with 51 per cent of these costs being brokerage fees and 20 per cent being exchange fees," it further said.
The proportion of young traders (age less than 30 years) trading in F&O has increased significantly from 31 per cent in FY23 to 43 per cent in FY24.
“It was observed that the age group of the traders was inversely proportional to the possibility of loss. As traders age increased, the percentage of loss-makers in F&O declined, indicating relative risk aversion, better risk management or the experience coming into play for elderly traders compared to young traders,” the report added.
The percentage of loss-makers for young traders (age less than 30 years) was higher (93 per cent in FY24) as compared to other age groups. On the other hand, the percentage of loss-makers in elderly traders (age greater than 60 years) was relatively lower at 79 per cent in FY24.
The percentage of loss-makers for low income traders’ category (annual income less than Rs 5 lakh) was the highest at 92.2 per cent in FY24 as compared to the average proportion of loss-makers at 91.1 per cent in FY24 and also compared to other income groups.
In terms of average profit and loss, the average net losses by female traders were relatively lesser as compared to male traders. In FY24, the female traders made an average per-person loss of Rs 75,973, while male traders incurred an average loss of Rs 88,804.