Concerns about family funds being diverted to speculative activities are growing, which is why the government and regulator are becoming increasingly alarmed by the increase in retail involvement in India's thriving stock market.

The Securities and Exchange Board of India issued a report on Wednesday that showed that in the cash stock market, seven out of ten intraday deals resulted in losses during the year that ended in March 2023. These results are in line with a survey conducted by the regulator last year, which showed that 90% of active retail traders lose money while trading derivatives.

The regulator has advised small investors time and time again to fight the impulse to trade in order to make a rapid profit. The tax rate on equity derivatives and capital gains from stock investments was increased by Finance Minister Nirmala Sitharaman on Tuesday in an effort to quell the retail frenzy that has driven the $5 trillion stock market to all-time highs.

India's revenue secretary, Sanjay Malhotra, stated in an interview on Thursday that while the government doesn't want to encourage speculative trading at the retail level, the futures and options segment is crucial to price discovery. 

Since the Covid-19 period lows in 2020, India's major stock index has more than quadrupled, driven mostly by the entry of individual investors into the high-risk futures and options market. As a result, the nation now has the greatest volumes of stock derivatives globally.

Abhishek Banerjee, Founder and CEO at Lotusdew Wealth & Investment Advisors, expressed worry that people's consumption patterns and longer-term capital building may be impacted by their loss of savings. "It's not just a leverage issue; it's a macro issue."