The other side of financialisation

There's been a dramatic rise in loans against gold in the past one year, but growth in unsecured loans is slowing. Bank loans to the NBFC sector have also dipped

- TAMAL BANDYOPADHYAY

Nine out of 10 individual traders lost money in the futures & options (F&O) segment of the stock market in three years between 2021-2022 (FY22) and FY24, a study by the Securities and Exchange Board of India (Sebi) points out. An estimated 11.3 million retail investors collectively lost ₹1.81 trillion during the three years (an average of ₹2 lakh per trader); FY24 alone accounts for ₹75,000 crore in net losses.

The latest study follows the capital market regulator's January 2023 report, which had found that 89 per cent of individual F&O traders lost money in FY22.

Despite consecutive years of losses, more than three-fourths of the traders who suffered losses continue their F&O activity. In fact, the number of retail traders dabbling in F&O has increased from 5.1 million in FY22 to 9.6 million in FY24. No wonder then that the average daily turnover on stock exchanges has surged to a record high at ₹540 trillion in September compared with close to ₹360 trillion a year ago.

In FY24, nearly 7.3 million individual traders lost money, with an average net loss of ₹1.2 lakh per person, inclusive of transaction costs.

Only 7.2 per cent of individual F&O traders made a profit over the three-year period. About 1 per cent of individual traders managed to earn profits of Rs 1 lakh or more, after adjusting the transaction costs, while 3.5 per cent of those who lost (around 400,000 traders) incurred an average loss of ₹28 lakh over the last three financial years.

Where do these traders come from? What's their socioeconomic background? Well, over 75 per cent of individual traders had declared an annual income of less than ₹5 lakh.

"A rise in individual traders' participation in the F&O segment has kick-started a debate on product suitability and the need for safety nets and firewalls for individual investors," the latest Sebi study points out.