Over 93% retail traders lost money in F&O in three years, says Sebi

Illustration: Dominic Xavier/Rediff.com

An analysis by the Securities and Exchange Board of India (Sebi) has revealed that retail traders remain at the wrong end of the stick when it comes to equity derivatives trading.

About 93 per cent of them incurred an average loss of Rs 2 lakh (per trader) during the last three financial years.

New Delhi

The new report highlights an increase in the loss-making individual investors in futures and options (F&O) to 91.1 per cent in FY24 compared to 89 per cent in FY22. The findings hold significance in shaping the market regulator’s policy making when it comes to regulating the F&O segment, where daily turnover often exceeds Rs 500 trillion.

Sebi has proposed seven key measures aimed at curbing retail participation and speculation in the derivatives market. They are likely to be cleared at its upcoming board meeting during the month-end.

Financial regulators, including the Reserve Bank of India (RBI), have cautioned investors against the high risks in the derivatives market. A critical concern pointed out by the report is that despite consecutive years of losses, more than three-fourths of the loss-making traders continue their F&O activity. A major concern pointed out by the report was that over 75 per cent of individual traders had declared an annual income of less than Rs 5 lakh.

Further, the proportion of traders below 30 years rose from 31 per cent in FY23 to 43 per cent in FY24. Nearly three-fourths of the traders were from beyond the top 30 cities — a higher proportion compared to that of mutual fund investors, which stands at 62 per cent.

“This rapid growth in F&O trading activity has once again highlighted the need for investor education and risk management practices. "This is because a significant proportion of retail traders continued to incur losses in the market,” said the Sebi report.