Amid growing concerns raised by regulators as well as the government on rising retail participation in the equity derivatives market, Securities and Exchange Board of India has published a new study on intraday trading. Importantly, the study noted that 7 out of 10, or over 70 per cent of individual intraday traders in the equity cash segment incurred losses in the 2022-23 financial year.
In the last few years, especially post the COVID-19 pandemic, stock market investing has taken off in a big way, with brokers reporting strong demat account additions. According to recent data, total number of demat accounts topped 15 crore for the first time in March 2024.
A growing number of these new investors are doing intra-day trading or trying their luck in the derivatives market, something that has not gone down well with regulators or even the government. In the Union Budget on Tuesday, Finance Minister Nirmala Sitharaman even raised STT (securities transactions tax) on F&O (futures and options), to curb some euphoria in that market. Capital gains tax was also raised.
According to the Sebi study, the number of individuals participating in intraday trading in equity cash segment surged over 300 per cent in 2022-23, compared with 2018-19.
Sebi said it had conducted the study analysing the trends in participation and in profits and losses in intraday trading by individuals in equity cash segment. The study had been peer reviewed by a working group with representation from academia, brokers and market experts, it added.
Further, the study was based on a sample of individual clients of the top-10 stock brokers, accounting for around 86 per cent of the individual client count in the equity cash segment during 2022-23.
"The study is expected to enhance awareness among individual traders about the risks involved in intraday trading in equity cash segment," it said.
The study noted that one in three individuals who traded in equity cash segment traded intraday. Also 48 per cent of these intraday traders were below the age of 30 years in 2022-23. These were only 18 per cent in 2018-19.
Proportion of loss-makers increased to 80 per cent for traders with very frequent trading activity, essentially doing more than 500 trades in a year. Also, the percentage of loss-makers among younger traders (aged less than 30 years) was higher (76 per cent in 2022-23) as compared to other age groups, according to the Sebi study.
"Over and above the trading losses incurred, loss makers expended an additional 57 per cent of their trading losses as trading costs in 2022-23; profit makers spent 19 per cent of their trading profits as trading costs in 2022-23," it said.
The market regulator had published a similar study on F&O trading in 2023. According to that study, 9 out of 10 individual traders in equity F&O segment incurred losses, with an average loss of Rs 1.1 lakh during 2022 financial year, whereas, 90 per cent of the active traders incurred average loss of Rs 1.25 lakh during the same period.
