More than 70% (7 out of 10) of individual intraday traders in the equity cash segment have incurred losses in FY 2022-23, a study conducted by SEBI has found. The study finds that the number of individuals trading intraday in the equity cash segment has increased from around 15 lakh in FY19 to 69 lakh in FY23 (4.6 times). The surge in participation has been associated with a rise in: (i) traders with low turnover (ii) traders who trade less frequently, (iii) young traders, and (iv) traders from Tier-II and Tier-III cities.
SEBI's study analyses trends in participation and profits and losses in intraday trading by individuals in the equity cash segment. It has been peer-reviewed by a working group with representation from academia, brokers and market experts.
The SEBI study covers FY 2018-19, FY 2021-22 and FY 2022-23, to analyse the trends before and after the pandemic comparatively. "The study is based on a sample of individual clients of the top-10 stock brokers, accounting for around 86% of the individual client count in the equity cash segment during FY 2022-23," says the market regulator.
The regulator says the study is expected to enhance awareness among individual traders about the risks involved in intraday trading in the equity cash segment.
Key findings of the study:
1. Around 1 in 3 individuals who trade in equity cash segment, trades intraday.
2. The share of young intraday traders (age less than 30 years) has grown to 48% in FY23 as compared to 18% in FY19.
3. Share of ‘Very Small’ traders (annual intraday turnover less than ₹50,000), increased to 56% in FY23 from 27% in FY19.
Proportion of Profit/Loss-makers
4. 7 out of 10 individual intraday traders (71%) in the equity cash segment incurred net losses in FY23.
5. The proportion of loss-makers increased further to 80% for traders with very frequent trading activity.
6. The percentage of loss-makers for younger traders (age less than 30 years) was higher (76% in FY23) than other age groups.
7. Even after 3 years of experience, 54% of traders were loss-makers in FY23, but this reflected a much lower percentage as compared to overall loss-makers (71%) in FY23.
8. The distribution of turnover of individual traders is highly skewed. The bottom 78% of traders (by intraday turnover) accounted for less than 1% of the total intraday turnover of all individual traders in FY23. On the other hand, top 6% traders accounted for more than 90% of the turnover.
9. During FY23, 76% of individual traders with annual intraday turnover more than ₹1 crore were loss-makers. 10. Individual traders with annual turnover of more than ₹1 crore incurred an average P/L of (-) ₹34,977 during FY23. For such traders’ group, the average profit by profit-makers was ₹89,172 while the average loss by loss-makers was ₹74,575 during FY23.
11. Average number of trades by loss-makers was higher than the profit-makers.
12. In FY23, loss-makers exacerbated their trading losses by 57% due to trading costs. Profit makers incurred 19% of their trading profits as trading costs in FY23.
13. Trading costs increased for those who traded very frequently.
