The number of individual traders in the equity F&O segment rose 500% to 4.5 million at the end of FY22, from 7.1 lakh during FY19, a study by the Securities and Exchange Board of India has shown.
Nine out of 10 individual traders in the equity F&O segment incurred net losses during both the years, said the study, which is based on a sample of all individual clients of the top-10 stock brokers, accounting for 67% of the overall individual client turnover in the equity F&O segment during FY22. Ninety-eight percent of traders traded in options while 11% traded in futures in FY22. The figures were 89% and 43%, respectively, during FY19.
On an average, loss makers registered net trading loss of close to Rs 50,000 in FY22. The average absolute net loss of a loss maker was over 15 times the net profit made by a profit maker. Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs, said the study. Those making net trading profits incurred 15-50% of such profits as transaction cost.
During FY22, traders in the 30-40-year age bracket had the highest share in participation (39%) across all age groups. For younger individual traders (20-30 years), the percentage share of participation went up significantly from 11% during FY19 to 36% during FY22.
A sizeable chunk of demat accounts opened after the first lockdown was also contributed by the 20-30 age group and they are actively participating in the derivatives segment, said experts.
“The Sebi findings highlight that the odds are not in favour of active trading and one should focus on compounding by investing mindfully in well researched stocks or simply parking money in ETFs and index funds. For high risk taking individuals who want to trade, it’s highly recommended that they invest time in understanding different trading models and taking bets only once strong process in positional and logic-based quantitative approach is in place,” said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.
During FY22, 11% of individual traders in equity F&O segment made an average profit of Rs 1.5 lakh. The percentage went down marginally to 10% for active traders, though the average profit made by them went up to Rs 1.9 lakh during the same period.