Sebi reveals 7 out of 10 intraday trade in cash segment made losses in FY23, 76% traders under 30 years of age

 

SEBI Bhavan at BKC Bandra in Mumbai.

You're young. Ambitious. Daring enough to venture into the slippery lanes of intraday equity trading at the stock markets. And you're losing money.

If the above description fits your profile, you're not alone. A study by India's capital markets regulator said that a staggering 76% of loss-making intraday traders were under 30 years of age.

That's a lot, considering that seven out of 10 (or 71%) of intraday traders in the cash segment made losses in FY23.

The study by the Securities and Exchange Board of India (Sebi) noted that overall, the share of under-30 intraday traders in India's stock markets shot up to 48 per cent in FY23 from 18 per cent in FY19.

In fact, the study showed that lower the age group, higher was the proportion of loss-makers. “In FY23, traders under the age group of more than 60 years had lowest loss-makers (53%), while those under 20 years of age had highest proportion of loss-makers (81%)," the study highlighted.

“Intraday trading is becoming a slippery slope for individual traders as financial institutions with high-frequency trading mechanisms skim the arbitrage which used to be earlier available for intraday traders," said Abhishek Kumar, a registered investment adviser (RIA) and founder of Sahaj Money, adding that Sebi's findings only reaffirmed the belief that most individuals lose money in intraday trading

Manuj Jain, CFA, co-head of product strategy at WhiteOak Capital AMC, said that a highlight of the study is the positive correlation between higher number of trading activities and loss-making traders.

“This shows a loss aversion bias, meaning the pain of losing is psychologically more intense than the pleasure of gaining. Traders who have incurred losses might engage in more trades to avoid the emotional discomfort of those losses, often without proper analysis or strategy," he said.

Harsh Roongta, founder of Fee Only Investment Advisers LLP, said that the Sebi study supplements an earlier study by the regulator that highlighted the perils of derivatives trading and how 90% of such traders made losses. He added that despite the study findings, derivatives volumes only shot up thereafter.

To be sure, finance minister Nirmala Sitharaman, in the Union budget for FY25 announced on Tuesday, sharply increased the securities transaction tax (STT) on both futures and options trading.

“This study may also meet a similar fate," said Roongta, adding that a multi-pronged solution was needed involving tighter regulations, onerous taxations and behavioural interventions. "This will be on the line of the anti-smoking campaign which was fought on multiple fronts and took years before it made an impact."

More details of the study

Sebi's study was conducted by Sebi’s Department of Economics and Policy Analysis to analyze trading by individuals in intraday cash segment during the study period—FY19, FY22 and FY23.

The study highlighted that the number of individual traders who traded intraday through top 10 brokers had increased 4.6 times to 6.9 million in FY23 from 1.5 million in FY19. But seven out of 10 individuals (71%) trading in intraday cash segment were loss-makers.

It was further seen that the share of female traders declined to 16% in FY23 from 20% in FY19. However the proportion of profit-makers among female traders was higher compared to male traders, across all the three years.

The study also showed a comparison of ‘single’ vs ‘married’ traders group, wherein it was seen that married traders group had higher proportion of profit-makers than ‘single’ traders group across all the three years of the study.

The study also highlighted across 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.

On Budget Day, July 23, foreign institutional investors (FIIs) sold Indian stocks worth ₹2,975.31 crore, according to NSE data. This was followed by another ₹5,130.90 crore in FII outflows on July 24. Despite these sell-offs driven by concerns over budget announcements such as the rise in capital gains taxes and STT in F&O trading, brokerage house Motilal Oswal Private Wealth (MOPW) believes that FIIs could soon return to the Indian equity markets.