Sebi study suggests 89% retail traders in equity F&O suffered losses in FY22

Sebi on Wednesday said it will soon issue guidelines on additional risk disclosures required to be made by brokers and exchanges to investors as its study suggested that every 9 in 10 individual traders in the equity F&O segment suffered losses in FY 2021-22. The findings, part of a study conducted by the regulator under the supervision of a working group, analysed the trading by individual investors with regard to net profit or loss encountered by them in the equity F&O (Futures & Options) segment for the period FY19 and FY22 only.

The study is based on a sample of all individual clients of all the top-10 stock brokers, accounting for 67 per cent of the overall individual client turnover in the equity F&O segment during FY 2021-22.

It revealed that 89 per cent of the individual traders (9 out of 10 individual traders) in the equity F&O segment incurred losses, with an average loss of Rs 1.1 lakh during FY22. Moreover, 90 per cent of the active traders incurred average losses of Rs 1.25 lakh during the same period.

On the other hand, only 11 per cent of individual traders in the equity F&O segment made a profit, with an average profit of Rs 1.5 lakh in FY22. The percentage dropped marginally to 10 per cent for active traders, though the average profit made by them went up to Rs 1.9 lakh during the same period, the study revealed.

The regulator believes that periodic data analysis and disclosure of this nature can significantly enhance investor awareness around market risks and “Sebi will shortly issue guidelines in respect of additional risk disclosures required to be made by brokers and exchanges to investors”.

The periods of study have been selected keeping in view the influx of individual investors in the last three years to comparatively analyse the trends before and after the Covid-19 outbreak.

It found that the total number of unique individual traders who traded through a sample of the top 10 brokers in the equity F&O segment was 45.2 lakhs during FY22, up from 7.1 lakhs during FY19, of which 88 per cent were active traders. Interestingly, individual traders belonging to the age group 30-40 years had the highest share in participation (39 per cent) across all age groups. For younger individual traders (20-30 years), the percentage share of participation went up significantly from 11 per cent during FY19 to 36 per cent during FY22.

Further, trading by individual traders in the equity F&O segment was dominated by males (80 per cent) during both years.

Among all the individual traders who traded in the equity F&O segment, 98 per cent traded in options while 11 per cent traded in futures during FY22 as opposed to 89 per cent and 43 per cent, respectively, during FY19.