A new study by the Securities and Exchange Board of India (SEBI) has highlighted the ongoing challenges faced by individual traders in the equity futures and options (F&O) market. 

Covering the fiscal years from FY22 to FY24, the report revealed that a staggering 93% of over one crore individual traders incurred significant losses, with an aggregate loss exceeding ₹1.8 lakh crores.

This follows SEBI’s previous report from January 2023, which showed that 89% of individual traders faced losses in FY22.

Key Findings:

1. High Loss Rates: The report found that the average loss per individual trader was around ₹2 lakh over the three-year period. Notably, the top 3.5% of loss-makers, around four lakh traders, suffered average losses of ₹28 lakh each.

2. Profitability Among Proprietary Traders and FPIs: Unlike individual traders, proprietary traders and Foreign Portfolio Investors (FPIs) fared much better. In FY24, proprietary traders earned gross trading profits of ₹33,000 crore, while FPIs gained ₹28,000 crore. These profits were largely driven by algorithmic trading, with 97% of FPI and 96% of proprietary trader profits coming from this method.

3. Rising Transaction Costs: Individual traders spent an average of ₹26,000 on transaction costs in FY24, contributing to a collective ₹50,000 crore in costs over three years. These costs were split between brokerage fees (51%) and exchange fees (20%).

4. Demographic Shifts: The report also noted an increase in participation from young traders and those from smaller cities. In FY24, 43% of F&O traders were below 30 years old, up from 31% in FY23. Additionally, 72% of traders hailed from Beyond Top 30 (B30) cities.

5. Low-Income Profiles: Over 75% of individual traders in FY24 reported an annual income of less than ₹5 lakh, emphasizing the financial strain these losses place on retail investors.

Despite the consistent losses, more than 75% of traders continued to participate in the F&O market, showing a persistence that has raised concerns about their long-term financial well-being.

The full report is available on the SEBI website.