SEBI Study Reveals 93% of Individual Traders Incurred Losses in Equity F&O between FY22 and FY24

A new study conducted by the Securities and Exchange Board of India (SEBI) has revealed that more than 90% of individual traders in the equity futures and options (F&O) segment continue to incur significant losses. The aggregate losses of individual traders exceeded Rs.1.8 lakh crores over the three-year period between FY22 and FY24.

This study follows up on a report released by SEBI in January 2023, which revealed that 89% of individual equity F&O traders lost money in FY22. With growing engagement by individual investors in equity and equity derivatives markets, the current study was conducted to analyze profit and loss patterns for individual traders in F&O from FY22 to FY24, as well as for all categories of investors in F&O during the single year FY24.

Key Findings

High Loss Rates Among Individual Traders

• During the three years from FY22 to FY24, 93% of more than 1 crore individual F&O traders lost an average of Rs.2 lakh per trader (including transaction fees).
• The top 3.5% of loss-makers, or nearly 4 lakh traders, lost an average of Rs.28 lakh per individual during the same time, including transaction fees.
• Only 1% of individual traders managed to earn profits exceeding Rs.1 lakh, after adjusting for transaction costs.

Profit Distribution Among Proprietary Traders and FPIs

• In contrast to individual traders, proprietary traders and Foreign Portfolio Investors (FPIs) as a class earned gross trading profits of Rs.33,000 crore and Rs.28,000 crore, respectively, in FY24 (before transaction costs). Individuals and others lost more than Rs.61,000 crore in FY24 (before accounting for transaction charges).
• The majority of earnings were generated by larger companies that used trading algorithms; algorithmic trading accounted for 97% of FPI profits and 96% of proprietary trader profits.

Transaction Costs for Individual Traders

• On average, individual traders spent Rs.26,000 per person on F&O transaction costs in FY24.
• Individuals spent around Rs.50,000 crore on transaction charges throughout the three-year period from FY22 to FY24, with brokerage fees accounting for 51% and exchange fees for 20%.

Increasing Participation of Young and B30 City Traders

• The proportion of young traders (below 30 years) in the F&O segment rose from 31% in FY23 to 43% in FY24.
• Individuals from Beyond Top 30 (B30) cities accounted for more than 72% of the overall F&O trader base, a higher proportion than mutual fund investors (62% of whom are from B30 cities).

Income Profiles of Traders

Over 75% of individual F&O traders in FY24 had declared an annual income of less than Rs.5 lakh.

Trading Behavior and Persistence

Despite multiple years of losses, more than 75% of loss-making traders continued to trade F&O.