Indian retail traders made net losses totalling 1.81 trillion rupees ($21.67 billion) in futures and options trading in the three years to March 2024, the markets regulator said in a study on Monday.
A mere 7.2% of the retail traders made a profit in the derivatives segment, the Securities and Exchange Board of India (SEBI) said.
India has been warning about the risks of frenzied derivatives trading by retail investors. The markets regulator is set to tighten rules for derivatives trading and raise entry barriers despite pushback from investors.
In fiscal year 2024, 91.1% of retail traders made losses while trading in derivatives, with gross losses totalling 524 billion rupees, the study showed. In contrast, proprietary traders, who make trades for financial institutions, and foreign investors made gross profits of 330 billion rupees and 280
billion rupees, respectively.
Most of the profits were generated by larger entities that used trading algorithms, with 97% of foreign investors' profits and 96% of proprietary traders' profits coming from algorithmic trading, SEBI said. The proportion of retail traders below 30 years in age rose to 43% in fiscal year 2024 and most individual traders belonged to low-income groups, earning less than 500,000 rupees annually, SEBI said.
SEBI has proposed a series of measures to curb the trading frenzy in derivatives, including raising the minimum trading amount by over three times. The government has raised taxes on such trades.
