SEBI Bombshell: F&O Traders Lose ₹75,000 Crore in Single Year

More than 91 per cent, or 73 lakh, individual traders lost money in the Futures & Option (F&O) segment in FY24 with an average net loss of Rs 1.2 lakh per person, a study conducted by markets regulator Sebi revealed on Monday.

Further, 93 per cent of over 1 crore individual F&O traders incurred average losses of about Rs 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24. The aggregate losses of such traders exceeded Rs 1.8 lakh crore during the period.

In FY24 alone, individuals incurred about Rs 75,000 crore in net losses, it added.

The Sebi study found the top 3.5 per cent of loss makers -- about 4 lakh traders -- faced an average loss of Rs 28 lakh per person over the same period, inclusive of transaction costs.

On the other hand, only 7.2 per cent of individual F&O traders made a profit over the period of three years and only 1 per cent of individual traders managed to earn profits exceeding Rs 1 lakh, after adjusting for transaction costs.

Moreover, the number of retail traders, or individual traders, has almost doubled in two years to about 96 lakh in FY24 from about 51 lakh in FY22.

Although such investors contributed about 30 per cent in the total turnover in FY24, they are a clear majority in number terms, as 99.8 per cent of total traders in the equity F&O segment are individuals.

"The availability of sophisticated trading platforms and lower transaction costs have enabled retail investors to actively trade in options and futures contracts, contributing to the surge in market liquidity," Sebi said.

The regulator said rapid growth in F&O trading activity has highlighted the need for investor education and risk management practices, as a significant proportion of retail traders continued to incur losses in the market.

This study follows up on a report published by Sebi in January 2023, which found that 89 per cent of individual equity F&O traders lost money in FY22.

With increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyse profit and loss patterns for individual traders in F&O during FY22 to FY24, and for all the categories of investors in F&O during FY24 alone.

While individuals made losses in F&O, the FPIs and proprietary traders earned profits. The proprietary traders earned about Rs 33,000 crore of gross profits in F&O segment in FY24, followed by FPIs who earned about Rs 28,000 crore in gross profits. Against this, individuals and others incurred losses of over Rs 61,000 crore in FY24 (before accounting for transaction costs).

In terms of demography, the proportion of young traders -- less than 30 years of age -- has significantly increased trading in the segment to 43 per cent in FY24 from 31 per cent in FY23.

Nearly 93 per cent of these young traders incurred losses in F&O in FY24, higher than the average lossmakers of 91.1 per cent in FY24.

Over 75 per cent of individual F&O traders (65.4 lakh traders) in FY24 had declared annual income of less than Rs 5 lakh. The proportion of low-income traders (annual income less Rs 5 lakh) has increased from 71 per cent in FY22 to 76 per cent in FY24.

The proportion of female traders participating in F&O has decreased from 14.9 per cent in FY22 to 13.7 per cent in FY24. Compared to male traders, less proportion of female traders incurred losses.

While 91.9 per cent of male traders incurred losses in FY24, 86.3 per cent percentage of female traders made losses in F&O.

In terms of geography, individuals from Beyond Top 30 (B30) cities made up over 72 per cent of the total F&O trader base in FY24, a higher proportion compared to mutual fund investors, 62 per cent of whom are from B30 cities.

On an average, individual traders spent Rs 26,000 per person on F&O transaction costs in FY24 and over the three-year period from FY22 to FY24, individuals collectively spent about Rs 50,000 crore on transaction costs, with 51 per cent of these costs being brokerage fees and 20 per cent being exchange fees.