SEBI report unveils Gujarat’s Rs 8,888 crore F&O loss, national traders lose Rs 75,000 crore
AHMEDABAD: A report by the Securities and Exchange Board of India (SEBI) has revealed a concerning trend while the Indian stock market continues to hit record highs. Gujarat's 10.1 lakh traders involved in Futures and Options (F&O) suffered a massive Rs 8,888 crore loss in the 2023-24 financial year, ranking the state second nationwide.
SEBI's findings further disclose that across India, 86.26 lakh traders collectively lost around Rs 75,000 crore in F&O trades during the same period.
A recent SEBI report “Analysis of Profit & Losses in the Equity Derivatives Segment (FY22-FY24)” reveals that over half of the F&O traders in 2023-24 hailed from just four states—Maharashtra, Gujarat, Uttar Pradesh, and Rajasthan. Maharashtra topped the list with 18.8 lakh traders (21.7%), followed by Gujarat with 10.1 lakh (11.6%), Uttar Pradesh at 9.3 lakh (10.7%), and Rajasthan contributing 5.4 lakh traders (6.2%) in the equity derivatives market.
In Gujarat, F&O traders faced an average loss of Rs 88,000 per person, while those in Maharashtra, Uttar Pradesh, and Rajasthan saw personal losses of Rs 74,000, Rs 73,000, and Rs 83,000 respectively.
The SEBI report reveals that Maharashtra's traders lost a staggering Rs 13,912 crore, with Uttar Pradesh traders incurring losses of Rs 6,789 crore. Nationally, 1.81 crore traders have collectively lost Rs 1.81 lakh crore in the F&O segment during the 2022-2024 financial years.
The SEBI report said “A significant 76.3% of loss-making traders continued to engage in F&O trading despite facing consecutive losses over two years. Out of 24.4 lakh investors who experienced losses in both FY22 and FY23, 18.6 lakh persisted with trading into the third year, while 5.8 lakh decided to stop. However, only 8.3% of those who continued trading in the third year, despite earlier losses, managed to turn a profit in that period.”
“The primary reason for most people losing money in futures and options is the lure of quick profits with minimal investment—it’s akin to gambling or a lottery,” says stock market expert Jaydev Chudasama. He points out that following the COVID-19 pandemic, there has been a significant surge in F&O investments, especially among those under 35.
“Young traders often dive into F&O trading without proper research or strategy, incuring heavy losses,” Chudasama adds. He also highlights a worrying trend: despite the growing losses, the rate of F&O investments continues to climb, with more people opting for options over futures, further amplifying their financial setbacks."
The Gujarat Congress has sharply criticized the ruling government, accusing it of turning a blind eye while the state's youth suffer. The party claims the government is ignoring the growing crisis, allowing Gujarat's young investors to face financial ruin.
"Why are crores of rupees, including family savings, hard-earned money, and retired employees' funds, being wiped out in the stock market’s futures and options segment over the last three years?" questioned Hiren Banker, spokesperson for the Gujarat Pradesh Congress Committee.
"Renowned investor Warren Buffett once called F&O a 'weapon of mass destruction,' and it's proving alarmingly accurate for Indian investors," Banker remarked, emphasizing the growing financial losses in this risky segment.
Top 10 states in terms of F&O traders on their FY24 values:
1. Maharashtra: 18.78%
2. Gujarat: 10.09%
3. Uttar Pradesh: 9.28%
4. Rajasthan: 5.37%
5. Madhya Pradesh 4.28 %
6. Karnataka: 4.02%
7. West Bengal: 3.94%
8. Bihar: 3.57%
9. Delhi: 3.41%
10. Haryana: 3.1%
Concentration of F&O Traders in India
A recent SEBI report titled “Analysis of Profit & Losses in the Equity Derivatives Segment (FY22-FY24)” highlights a significant geographic concentration of traders in the F&O market. Over half of the F&O traders in 2023-24 came from just four states:
• Maharashtra: 18.8 lakh traders (21.7%)
• Gujarat: 10.1 lakh traders (11.6%)
• Uttar Pradesh: 9.3 lakh traders (10.7%)
• Rajasthan: 5.4 lakh traders (6.2%)
Traders Persist Despite Losses in F&O Market
The SEBI report reveals a striking insight into trader behavior in the F&O market. Despite consecutive losses:
• 76.3% of loss-making traders continued to engage in F&O trading after facing two years of losses.
• Out of 24.4 lakh traders who incurred losses in both FY22 and FY23, 18.6 lakh persisted into the third year, while 5.8 lakh chose to stop.
• However, only a small percentage (8.3%) of those who continued trading after two years of losses were able to turn a profit in the third year.
This suggests a strong persistence among traders, even in the face of consistent losses, with very few managing to recover profitability.