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Mumbai: With the Nifty 50 index moving towards the high of 26000 and the Sensex crossing 85000, stocks are witnessing an unprecedented record gain. In this record bullish frenzy, crores of people of the country are betting their huge capital in the stock market in the desire to become a millionaire overnight, but in this bullish frenzy, the stock market has become a casino-gambling house. Lakhs of people are trading in futures and options (F&O). A new study by capital market regulator SEBI has revealed shockingly and worryingly that only brokers are earning crores of rupees in brokerage and crores of rupees in exchange-stock market fees, while individual traders are sinking in the abyss of losses.
Even though the capital market regulator Securities and Exchange Board of India (SEBI) has warned the young generation who are turning to the stock markets in the greed of making money overnight and have not learned a lesson despite reaching twelve thousand lakhs, it seems that F&O casino has become an addiction, shocking figures have come out in the SEBI study. 93 percent of individual traders i.e. 1.13 crore traders have suffered huge losses in equity F&D from FY 2022 to FY 2024. The number of which has increased to Rs 1.8 lakh crore in the last three years. The shocking and worrying thing is that, out of the total traders who have traded in F&O casino in the last three years, more than 75 percent of the traders have continued to trade in F&O casino. That is, the worrying situation is being seen that the losing gambler doubles up and continues to lose money. Here the young generation is constantly getting ruined.
Notably, in a report published by SEBI in January 2023, a study found that 89 per cent of individual traders incurred losses in equity F&O trading in FY 2022. The inflow of individual investors into equity and equity derivatives markets has been seen to be steadily increasing. Along with this, a current study was conducted by SEBI on the profit and loss pattern of individual traders during three years from FY 2022 to FY 2024. The study covered all categories of investors in F&O in FY 2024.
Unlike individual traders, proprietary traders made a profit of Rs 33,000 crore and foreign portfolio investors (FPIs) made a profit of Rs 28,000 crore in FY 2024, net of trading expenses. While individuals and others have suffered a huge loss of Rs 61,000 crore in this FY 2024. That is, large entities, institutions have made profits using algo trading, 97 per cent of FPIs have made profits and 96 per cent of proprietary traders have also made profits using the algo trading mechanism.
According to this study, the transaction cost for individual traders in F&O in FY 2024 has been Rs 26,000 per person on average. In the three years between FY 2022 and 2024, individual traders have spent a total of Rs 50,000 crore in trading expenses. 51 percent of these expenses are brokerage fees and 20 percent are exchange fees. That is, in these three years, brokers have earned a whopping Rs 25,500 crore and exchanges have earned a whopping Rs 10,000 crore under brokerage.
The share of the younger generation and young traders below the age of 30 is increasing alarmingly in the F&O segment. The share of this category of traders has increased from 31 per cent in FY23 to 43 per cent in FY24. The proportion of individual F&O traders from cities other than the top 30 (B30-beyond top 30 cities) has reached more than 72 per cent of the total traders. This number has also surpassed the number of 62 per cent investors investing in mutual funds from B30 cities.
What is also worrying is that among the traders who declared their income details in FY24, more than 75 percent of individual F&O traders declared an annual income of less than Rs 5 lakh. Despite continuous losses in F&O, 75% of the traders who made losses continue to trade in F&O. SEBI Study After knowing these shocking facts, market experts say that the government and SEBA should prevent the young generation from coming to this gambling den for individual investors in the derivatives-F&O segment, who are leaning as traders instead of becoming medium to long term investors. The greed for short-term profits in this historic boom, including the extraordinary increase in the net worth limit, makes it necessary to impose entry restrictions.
SEBI's study revealed some shocking facts!
(1) During the three years from FY22 to FY24, 93 per cent of the over one crore individual F&O traders suffered an average loss of Rs 2 lakh per trader (including trading costs).
(2) Of these loss-making traders, the top 3.5 per cent of four lakh traders incurred an average loss of Rs 28 lakh per trader during this period.
(3) After adjusting for trading costs, only one percent of these total traders have managed to earn an average profit of more than Rs 1 lakh.
(4) Retail traders paid Rs 50,000 crore in trading expenses in three years: Brokers earned Rs 25,500 crore in brokerage and Rs 10,000 crore as exchange fees.