In an analysis done by the Securities and Exchange Board of India Sebi, it has been found that while the number of individual traders in the equity derivatives segment increased exponentially between FY 19 and FY 22, a large majority of the individuals experienced losses.
The findings have again corroborated what the Indian market watchdog has been saying for a long time that derivatives are a risky instrument for retail investors and those who are not fully aware of the risks of the instrument.
The number of individual traders in the equity F&O segment increased by 500 per cent in FY 22 from 7.1 lakh in FY 19 to 45.2 lakh in FY 22 according to the Sebi analysis.
Individual traders of the age group 30 -- 40 years had the highest level of satisfaction.
During FY22, participation in participation was 39 per cent across all age groups.
For younger individual traders, the percentage share of participation went up from 11 per cent during FY 19 to 36 per cent during FY 22.
More importantly, nine out of 10 individual traders in the equity F&O segment incurred net losses during both the years -- FY 19 and FY 22 even as 98% of individual traders in the equity F&O segment traded in options during the same period.
In FY 2021 -- 22 the loss makers had net trading loss of close to 50,000. The Sebi release stated that the average net loss of a loss maker was more than 15 times the net profit made by a profit maker.
The loss makers expended an additional 28 per cent of net trading losses as transaction costs, over and above the net trading losses incurred.
The capital markets regulators will issue guidelines for more risk disclosures to be made by brokers and exchanges to investors, based on the findings of the study.
The study, based on a sample of all individual clients of the top 10 stockbrokers, accounting for 67 per cent of the total client turnover in the equity F&O segment during FY 22.