More than nine out of ten individual traders in the equities futures and options (F&O) segment continue to suffer large losses, according to a recent survey done by capital markets regulator Sebi. This research builds upon a January 2023 Sebi report that revealed 89 percent of individual stock F&O traders had a loss in FY22.

"93 percent of over 1 crore individual F&O traders incurred average losses of around Rs 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24," it said.

Over the course of the three-year period between FY22 and FY24, the survey also revealed that the total losses incurred by individual dealers topped Rs 1.8 lakh crore.

"With increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyze profit and loss patterns for individual traders in F&O during the three years FY22 to FY24, and for all the categories of investors in F&O during the single year FY24," it stated.

The survey also revealed that the top 3.5% of dealers, or around 4 lakh merchants, had average losses of Rs 28 lakh per during the same time period, including transaction charges. Furthermore, after deducting transaction fees, barely 1% of individual dealers were able to make profits greater than Rs 1 lakh.

Proprietary traders and foreign portfolio investors (FPIs) as a class had gross trading gains of Rs 33,000 crore and Rs 28,000 crore, respectively, in FY24 (before deducting transaction expenses), in contrast to individual traders. In FY24, individuals and other parties suffered losses of more than Rs 61,000 crore (before transaction expenses were taken into account). Larger companies that employed trading algorithms produced the majority of the earnings; 97% of FPI profits and 96% of proprietary trader gains came from algorithmic trading, according to Sebi's analysis.

"In FY24, individual merchants incurred F&O transaction expenses at an average of Rs 26,000 per person. Individuals spent around Rs 50,000 crore on transaction expenses throughout the course of the three-year period from FY22 to FY24, with brokerage fees accounting for 51% of these expenditures and exchange fees for 20% of them," it added.

"In the F&O segment, the percentage of young traders (those under 30) increased from 31% in FY23 to 43% in FY24. More than 72% of all F&O traders were from Beyond Top 30 (B30) cities, a greater percentage than mutual fund investors, who make up 62% of B30 city residents. In FY24, more than 75% of individual F&O dealers reported making less than Rs 5 lakh annually. More than 75% of traders who had losses in a row continued to trade F&O," the survey revealed.

Sebi released consultation documents in July with the intention of reducing volatility in the F&O market.