SEBI Study: 93% of Individual Traders in F&O Suffer Losses from FY22 to FY24

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.

🚨 India's market regulator, SEBI, reported that 91.1% of individual traders incurred losses in derivatives trading during FY24.

From FY22 to FY24, individual traders collectively lost Rs 1.81 trillion in futures and options (F&O) trading, according to SEBI's data.

SEBI…

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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.