7 in 10 intraday traders in equity cash suffered losses in FY23: Sebi study

Above trading losses incurred, loss makers expended additional 57 per cent of their trading losses as trading costs in 2022-23, while profit makers spent 19 per cent of trading profits as trading cost

A study by market regulator Sebi showed that 7 out of 10 individual intra-day traders in the equity cash segment made losses in the financial year 2022-23.

At the same time, the study highlighted a sharp surge of over 300 per cent in the number of individuals participating in intraday trading in the equity cash segment in 2022-23 compared to 2018-19.

Interestingly, the average number of trades by loss-makers was higher than the profit-makers. Further, the share of young intra-day traders, with less than 30 years of age, has risen significantly over the period, according to the study released by Sebi on Wednesday.

The markets regulator has conducted a study to analyse the trends in participation and profits and losses in intraday trading by individuals in the equity cash segment. It covered the periods of FY2018-19, FY2021-22 and FY2022-23 to comparatively analyse the trends before and after the pandemic.

The study, based on a sample of individual clients of the top-10 stock brokers accounting for around 86 per cent of the individual client count in the equity cash segment during 2022-23, has been peer-reviewed by a working group with representation from academia, brokers and market experts.

In its study, Sebi found that around one in three individuals who trade in the equity cash segment, trades intraday. Moreover, the share of young intraday traders, with less than 30 years of age, has grown to 48 per cent in 2022-23 compared to 18 per cent in 2018-19.

"7 out of 10 individual intraday traders or 71 per cent in the equity cash segment incurred a net loss in FY2022-23," the study said, adding that the proportion of loss-makers jumped to 80 per cent for traders with very frequent (more than 500 trades in a year) trading activity.

Over and above the trading losses incurred, loss makers expended an additional 57 per cent of their trading losses as trading costs in 2022-23, while profit makers spent 19 per cent of their trading profits as trading costs.

Further, the percentage of loss-makers among younger traders was higher at 76 per cent in 2022-23 compared to other age groups.

The Securities and Exchange Board of India (Sebi) believes that the study is expected to enhance awareness among individual traders about the risks involved in intraday trading in the equity cash segment.

Earlier a study by Sebi found that 89 per cent of individual traders in the equity F&O segment suffered losses with average losses of Rs 1.1 lakh in FY22.

Additionally, there was an exponential increase in the F&O segment participation during the pandemic, with the total number of unique individual traders increasing by over 500 per cent from 710,000 in FY19 to 4.52 mn in FY21, the study noted.