Stock market regulator SEBI keeps reminding retail investors that in this series SEBI has released a report showing how ordinary investors are losing their hard-earned money in the stock market.
In fact, SEBI’s latest research shows that 93 out of every 100 individual traders are still incurring losses in the equity futures and options (F&O) space. The report is based on a SEBI report released in January 2023, which found that 89% of individual equity traders lost money in F&O in FY22. Let us tell you that in July, SEBI released this report with an aim to prevent instability in the F&O sector.
So addicted to F&O?
According to the latest report, 93 per cent of individual traders in the F&O space (whose volume exceeds Rs 1 crore) lost an average of Rs 2 lakh during the three-year period ending 2022-24. The study also said that the total losses suffered by individual traders during the three-year period from FY2022 to FY2024 have exceeded Rs 180 crore.
The report shows that the number of individual investors in stocks and stock derivatives has increased rapidly over the past three years. The study also mentioned that the number of traders in the 3.5% with the highest losses is about 400,000, and the average is 400,000. The loss was Rs 28 lakh. There are also transaction costs involved. Apart from this, only 1% of individual traders made a profit of Rs 1 lakh in FY24, after deducting transaction costs.
Who makes money in the stock market?
Apart from individual traders, prop traders and foreign portfolio investors (FPIs) also make money from the equity F&O space. Investors in the proprietary traders category made profits of Rs 33,000 crore in FY24, while FPIs made profits of Rs 28,000 crore, including transaction costs. On the contrary, individual traders suffered losses of over Rs 61,000 crore in FY24. Statistics show that most of the profits are made by big traders who use trading algorithms. Of these, 97% are FPIs and 96% are proprietary traders.
Not only this, the average trading cost paid by individual traders on F&O in FY24 was Rs 26,000. During the three-year period from FY22 to FY24, individuals spent a total of about Rs 50,000 crore on transaction costs, of which 51% of the costs were brokerage fees and 20% transaction fees.
