Covid have been a curse as well as a boon for many people. A boon for those who invested and explored the market and made short-term gains before getting the same diluted.
Financial advisors are often
forgotten when there is a bull market, and the market rises on one side. This
leads to a trap for investors getting into the wrong hands of wealth destruction
rather than wealth creation. You blame SEBI
for its risk measurement process, but one will never accept the mistake of avoiding
a financial advisor. The pride in wealth
creation by own is a delusion. Retail investors' share in F&O trading volumes
skyrocketed from 2% in 2018 to 41% in 2024, reflecting a dramatic increase in
participation. By FY24, retail investors accounted for 35–41% of total
derivatives trading volumes. The number of unique individual traders in F&O
grew from 8 lakh in FY19 to 45 lakh in FY23, a nearly sixfold increase. By April 2024, India had 154 million trading
accounts, a fourfold jump from 36 million in April 2019, with a significant
portion active in F&O. Active retail investors in index F&O (e.g.,
Nifty, Bank Nifty) rose from 5.1 million in FY22 to 7.2 million in
April–November FY24, a 7.5% increase year-on-year.
The maturity of the investors from these data
makes every Indian proud but the loss also makes us realise the price of
ignoring financial advisor.Despite regulatory interventions, F&O trading
continues to be a high-risk, high-loss zone for individual investors.
According to the latest SEBI study, a staggering 91%
of individual traders incurred net losses in the Futures & Options
(F&O) segment during FY25, with total retail losses crossing ₹1.06 lakh
crore — a 41% increase from FY24.
This data, compiled from 13 major brokerage firms covering
over 96 lakh unique traders, paints a grim picture of retail
participation in India’s derivatives market. Despite tighter regulations and
increased awareness campaigns, the F&O boom continues to trap retail
investors into speculative, loss-making behaviour.
Now let's come to find out who is avoiding the financial
advisors?
1.
Young investors (under 30) increased from 29% of
all investors in FY19 to 48% in FY23, with 43% of F&O traders in FY24 below
30.
2.
Most retail F&O traders belong to low-income
groups, earning less than ₹5 lakh annually.
3.
Over 60% of new trading accounts on platforms
like Zerodha come from small towns, with an average user age of 29.
4.
The average holding time for options is 30
minutes, indicating pure speculation rather than hedging or arbitrage.
5. Cases of young traders incurring massive losses (e.g., a student losing ₹46 lakh crore with borrowed funds) highlight gambling-like behaviour.
Hence, this is the age bracket who don’t want to consult financial advisors. Now you know why mutual investments are dated and do not excite investors. But the truth is that maturing in terms of ease of doing transactions does not mean maturity for investors to invest and choose quality products. The underlying risk of loss is often forgotten in short-term gains. A financial advisor's guidance is highly required where volatility is high and the predictability of returns from investment assets is fragile.
1. The Numbers: An Escalating Loss Spiral
- Total
net losses (FY25): ₹1.06 lakh crore
- Average
loss per trader: ₹1.1 lakh
- Losses
in FY24: ₹74,812 crore
- Retail
participation (unique traders): 96 lakh across the year
- Active
traders Q1 FY25: 61.4 lakh
- Active
traders Q4 FY25: 42.7 lakh (down 20%)
The loss rate, while marginally better in Q4 FY25 (average
losses down 8%, aggregate losses down 26%), still reflects a systemically unfavourable
structure for individuals.
Retail vs Institutional: A Rigged Playing Field?
One of the starkest revelations from SEBI’s research is the profit
distribution between retail and institutional players:
- 91%
of individuals lost money
- Institutions
(FPIs and proprietary desks) made the majority of the profits
- In
FY24, algorithmic trading strategies accounted for:
- 97%
of FPI trading profits
- 96%
of prop desk profits
This suggests that retail traders are consistently on the
losing end of trades executed by AI-driven, algorithmic, or
latency-sensitive strategies. These strategies exploit micro-price
inefficiencies, order flow prediction, and real-time hedging
techniques that are unavailable to the average retail participant.
India’s derivatives market now contributes over 80% of
NSE’s total turnover, yet its role in real economic hedging or capital
formation is debatable. For comparison:
- U.S.
index options turnover is 25–30% of equities turnover
- India's
index options turnover is ~4x the next largest market (as per WFE)
What was designed to be a risk management tool is now
functioning more like a speculative casino, especially with zero-day
expiry options, short-term P&L chasing, and YouTube-driven
trading narratives influencing lakhs of young traders.
The explosion in F&O participation has created the illusion of financial empowerment for retail investors, while masking the systemic wealth transfer to institutions. SEBI’s data confirms what many feared: the F&O market has become an engine of loss for most individuals.