MUMBAI: A study carried out by the market watchdog Sebi has found that more than seven out of ten (71 percent to be precise) retail traders who engaged in intraday trading in the cash segment lost money in FY23.
The study also noted that there has been over a 300 percent surge in the number of retail investors participating in intraday trading in the equity cash segment in FY23 compared to FY19. One in three retail traders in the equity cash segment engages in intraday trades.
It can be noted that FY23 was one of the worst or muted for the market as a whole, with the Sensex returning just 0.72 per cent, following a high of 18.3 percent in the previous year and a whopping 68 percent the year before, and 24.85 percent in FY24.
In September last year, the regulator came out with another study on derivatives, which found that retail investors in the F&O space had lost heavily, to the tune of Rs 1.25 lakh annually.
All this led to the Budget presented on Tuesday increasing the transaction tax on derivatives five times to 0.1 percent and also increasing the tax on both short-term as well as long-term capital gains to 20 percent from 15 percent and 12.5 percent from 10 percent, respectively, which spooked the market.
In a statement on Wednesday, Sebi said it has conducted the study analyzing the trends in participation and profit and loss in intraday trading by individuals in the equity cash segment. The study has been peer-reviewed by a working group with representation from academia, brokers, and market experts and covers the periods FY19, FY22, and FY23.
The study, which makes a comparative analysis of the trends before and after the pandemic, is based on a sample of individual clients of the top-10 stock brokers who account for around 86 percent of the individual client count in the equity cash segment in FY23.
Some of the major findings of the study are as follows: as much as 71 percent of the intraday retail traders in the cash segment incurred net losses in FY23, and the proportion of loss-makers increased to 80 percent for traders with very frequent (more than 500 trades in a year) trading activity. As much as one in three of them trades intraday, and their number rose over 300 percent in FY23 from FY19.
The share of young intraday traders (under 30 years) has grown to 48 percent in FY23, up from 18 percent in FY19, and as much as 76 percent of them lost money compared to other age groups.
The average number of trades by loss-makers is higher than that of profit-makers, and over and above the trading losses incurred, loss-makers expended an additional 57 percent of their trading losses as trading costs in FY23, whereas for those making money, it was only 19 percent of trading costs.
Sebi expects the study to help enhance awareness among individual traders about the risks involved in intraday trading in the cash segment.
