SEBI Report on F&O Traders, A division of the Securities and Exchange Board of India (SEBI) has released a study report whose results would perhaps dissuade the droves of young, digitally savvy traders tapping the equity F&O segment for some quick and easy money.
The Department of Economic and Policy Analysis in a study report released on January 25 analysed the trading patterns and P&L statements of individual investors in the equity F&O segment.
Data for the study has been collated from the top 10 brokers in the country. The total number of traders in the sample witnessed a 500 percent increase between FY19 and FY22. In FY19, 7.1 lakh traders were included in the sample which jump to 45.2 lakhs in FY22.
Consider, for instance, that 89 percent of the individual traders (i.e. 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. On the other hand, 90 percent of the active traders incurred average losses of Rs 1.25 lakh during the same period.
If one needed more evidence to forswear from trading in the equity F&O segment, the report states that during FY22, only 11 percent of individual traders in the equity F&O segment made a profit with an average profit of Rs. 1.5 lakh. The percentage went down marginally to 10 percent for active traders, though the average profit made by them went up to Rs. 1.9 lakh during the same period.
For the group of active traders-excluding outliers- only 6percent of individual traders in the equity F&O segment made a profit with an average profit of nearly Rs 3,400 in FY22. Substantiating the long-held belief that trading in the equity F&O segment is best left to experts, the report states that the top 1 percent and top 5 percent active profit makers accounted for nearly 51 percent and 75 percent of the total net profit earned by all active profit makers, respectively.
For the group of active traders-excluding outliers- on average, loss makers registered net trading loss close to Rs 50,000 in FY22. Further, for the group of active traders, the average loss of a loss maker was 15 times the average profit by a profitable trader during FY22.
SEBI Report : Which Age Group will Loss More Money ?
The report furnishes academic evidence for what most of us have known anecdotally all along: That the new wave of retail investors and traders rushing to the markets predominantly includes people from the younger demographic.
The report states that during FY22, individual traders belonging to the age group 30-40 years had the highest share in participation (39 percent) across all age groups. For younger individual traders (20-30 years), the percentage share of participation went up significantly from 11 percent during FY19 to 36 percent during FY22.
The study report kindles some hope for traders in the below 20 years age category. It states that the average profit earned by profit makers belonging to the youngest age group with below 1 percent share in participation, that is the less than 20 years age group, was highest as compared to all other age groups during both FY19 and FY22.
However, the average profit earned by them has gone down dramatically: In FY19, the average profit stood at Rs 11,26,282, whereas, in FY22, the average profit earned was Rs 4,91,825.
It is the senior citizens who were bested by F&O trading. Their losses in FY22 were the highest compared to losses made by the average loss-makers in the younger than 30 years old age group.
Young investors, on average, seem to be getting the best of all the other age groups: The <20 years age group made an average profit in index options trading during both the years i.e.FY19 and FY22, whereas individual traders from all other age groups incurred average losses during both the year.
Further, the average profit earned by the youngest profit makers was significantly higher than other age groups with an average profit of Rs 5.4 lakh in stock futures followed by an average profit of Rs 3.8 lakh in index options and Rs 1.7 lakh in index futures during FY22.
Having said that, the active traders in the less than 20 years old age group burnt their hands trading in futures, be it index or stock futures. Their average index futures loss at Rs 54,584 outsized all the other age groups. In stock futures, their average loss was Rs 1.12 lakh.