Home Budget Bleeding Red! A Sebi study reveals that 71% of retail traders are incurring losses in the intraday trading segment.

Bleeding Red! A Sebi study reveals that 71% of retail traders are incurring losses in the intraday trading segment.

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India’s markets regulator Sebi has confirmed a widely acknowledged reality on Dalal Street: the majority of retail traders in intraday trading are not profitable. A Sebi study reveals that 71% of individual traders in the intraday equity segment reported losses during FY23, an increase from 65% in FY19 and 69% in FY22.

Markets regulator Sebi has confirmed a widely recognized truth on Dalal Street: most retail intraday traders end up losing money. Sebi’s study shows that 71% of individual traders in the intraday equity segment faced losses during FY23, compared to 65% in FY19 and 69% in FY22.

Moreover, frequent trading exacerbates losses. For those who trade very frequently, the proportion of loss-makers rises to 80%. The Sebi report indicates that 76% of individual traders with an annual intraday turnover exceeding Rs 1 crore experienced losses in FY23.

Impact of Frequent Intraday Trading on Financial Outcomes

Markets regulator Sebi has confirmed a well-known fact on Dalal Street: the majority of retail intraday traders end up losing money. According to Sebi’s study, 71% of individual traders in the intraday equity segment incurred losses during FY23, up from 65% in FY19 and 69% in FY22.

Additionally, frequent trading tends to increase losses. Among those who trade very often, 80% reported losses. The Sebi report also notes that 76% of individual traders with an annual intraday turnover exceeding Rs 1 crore experienced losses in FY23.

The proportion of young traders surged from 18% in FY19 to 48% in FY23. The study revealed that those who incurred losses tended to trade more frequently compared to those who made a profit.

Intraday trading
Image Source: Regstreet Law Advisors

The research also emphasized the impact of trading costs. “In addition to the trading losses, those who lost money spent an extra 57% of their trading losses on trading costs in FY23. Conversely, profit-makers spent 19% of their trading gains on trading costs in FY23,” the report noted.

SEBI’s study examined data from FY19, FY22, and FY23 to assess trends before and after the pandemic. It is based on a sample of individual clients from the top 10 stock brokers, representing approximately 86% of individual clients in the equity cash segment during FY23.

Harsh Roongta, founder of Fee Only Investment Advisers LLP, noted that the Sebi study adds to previous research by the regulator, which highlighted the risks of derivatives trading, showing that 90% of such traders incur losses. Despite these findings, Roongta observed that derivatives trading volumes have continued to increase.

Finance Minister Nirmala Sitharaman recently addressed this issue in the Union Budget for FY25, announcing a significant increase in the securities transaction tax (STT) on futures and options trading.

Roongta suggested that this study might face a similar outcome, emphasizing the need for a comprehensive approach that includes stricter regulations, higher taxes, and behavioral interventions. He compared this approach to the multi-faceted anti-smoking campaign, which took years to show results.

Additional Details of the Study

Sebi’s study, conducted by the Department of Economics and Policy Analysis, examined individual trading in the intraday cash segment during FY19, FY22, and FY23.

The study found that the number of individual traders using the top 10 brokers for intraday trading surged 4.6 times, reaching 6.9 million in FY23, up from 1.5 million in FY19. Despite this increase, 71% of these traders incurred losses.

The study also noted a decline in the proportion of female traders, dropping to 16% in FY23 from 20% in FY19. However, female traders had a higher proportion of profit-makers compared to their male counterparts across all three years.

Additionally, the study compared ‘single’ versus ‘married’ traders, finding that married traders consistently had a higher proportion of profit-makers compared to single traders across all three study years.

The analysis also revealed that, among the 13 sample cities studied from FY19 to FY23, the proportion of profit-makers was highest in tier I cities, followed by tier II and tier III cities.

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