F&O trading can't be a national pastime, says SEBI member Ashwani Bhatia

Over the last few years, the number of Indians investing in the stock market has grown considerably. From around 4.1 crore at the start of the Covid-19 pandemic in 2020, the number of demat accounts jumped to 17.5 crore as of September 2024. At the same time, volumes in the derivatives market have jumped too, something the Securities and Exchange Board of India (SEBI) is not too happy about.

The market regulator had earlier this month tightened rules for trading in futures and options market. In the Union Budget this year, the STT (Securities Transactions Tax) was also raised on F&O trading.

On Tuesday, Ashwani Bhatia, a full-time member of SEBI, reiterated the regulator's warning that over-exuberance in F&O market could hurt retail investors and they would rather do serious investing.

"India accounts for the largest volume of F&O globally. We are number one and globally also more than 50 per cent of the F&O volume happens in India. This is a crown we do not wish to wear. F&O cannot be and should not be a national pastime," Bhatia said speaking at the 14th Morningstar Investment Conference in Mumbai.

He noted that in the past three years, there had been losses of as much as Rs 1.80 lakh crore and 93 per cent of the investors had lost money.
"Your odds are terrible," stressed Bhatia.

He felt Indians should rather invest and participate in wealth creation happening across the country.

"Mutual funds are one of the most stable and diverse investing options available to retail investors. In just five years, the mutual fund industry assets under management have increased from Rs. 23.8 lakh crore in March 2020 to the current level of Rs. 67.1 lakh crore as of the end of September 24," he pointed out.

Money coming via monthly SIPs (systematic investment plan) is now Rs 24,509 crore, he noted, but stated that there was a long way to go.

"The global average AUM to GDP is about 60-70 per cent and the fact that we are at about 20 per cent currently tells us that we have some way to travel," said Bhatia.

He also reiterated SEBI's concerns over the surge in the SME (small and medium enterprises) IPO market.

"SME listings are closely monitored by exchanges and SEBI to ensure they do not engage in irrational exuberance, price manipulation or fraudulent trade practices," said Bhatia.

The way retail participation is happening, the number of times IPO issues are oversubscribed, the way market making happens, the way underwriting happens and obviously they did not feel very comfortable about what was going on, he said.

There has been a huge rise in SME IPOs over the past year, with a few IPOs getting significantly more interest than the issue size. The regulator has also passed orders against a few SMEs in the recent past.

Bhatia advised retail investors to be extremely careful while investing in SME IPOs.