SEBI Report: 93% Retail Investors Face Losses in F&O Trading, Proprietary Traders Profit - Read Here

SEBI Report: A new report by the Securities and Exchange Board of India (SEBI) has shed light on the harsh realities faced by individual traders in the stock market, particularly in the Futures and Options (F&O) segment. Despite ongoing efforts to educate retail investors, SEBI’s research shows that an overwhelming 93% of individual traders are still incurring losses. This statistic is a stark increase from a previous SEBI report in January 2023, which had revealed that 89% of traders lost money in FY22.

SEBI Report: F&O Segment Woes for Retail Investors

SEBI Report: According to the latest report, covering FY22 to FY24, over 1 crore individual traders ventured into the F&O segment, and a staggering 93% of them reported an average loss of ₹2 lakh each. Collectively, these traders lost more than ₹1.8 lakh crore over the three-year period. The report highlights that the number of individual investors participating in equity and derivative markets has risen sharply, yet most of them continue to suffer substantial financial setbacks.

What’s even more concerning is that the top 3.5% of loss-making traders, approximately 4 lakh individuals, recorded an average loss of ₹28 lakh each, with transaction costs playing a major role in exacerbating their losses. During FY24, only 1% of individual traders managed to generate a profit of ₹1 lakh after deducting transaction costs.

Who’s Making Money in the Stock Market?

While individual traders continue to suffer losses, proprietary traders and Foreign Portfolio Investors (FPIs) have been profiting handsomely from the equity F&O segment. In FY24 alone, proprietary traders earned ₹33,000 crore, while FPIs pocketed ₹28,000 crore. This sharp contrast reveals that larger, institutional players have fared much better, often utilizing trading algorithms to maximize their gains. The report indicates that 97% of FPIs and 96% of proprietary traders were able to profit, largely thanks to their sophisticated trading tools and strategies.

On the other hand, individual traders not only faced significant financial losses but also incurred hefty transaction costs. On average, an individual trader spent ₹26,000 in transaction costs on F&O trading during FY24. Over the three-year period, the total transaction costs for individual traders amounted to a massive ₹50,000 crore, with 51% of the costs being brokerage fees and 20% being exchange fees.

SEBI’s Warning to Retail Investors

The SEBI report serves as a stark reminder for retail investors to exercise caution, especially when engaging in the complex F&O segment. The regulatory body has consistently advised individual traders to fully understand the risks associated with such trades before investing their hard-earned money. Despite these warnings, the growing participation of individual traders in the market, coupled with rising losses, suggests a pressing need for more robust investor education and better risk management strategies.