We like to believe that the financialisation of wealth in India is a good thing as it suggests that affluent Indians are shifting their trillions of $ from physical to financial assets. TCA Sharad Raghavan’s piece suggests that a such a reading of the recent boom in stockmarket trading would be incorrect. His piece – which is specifically focused on derivatives trading (rather than the buying & selling of shares) – says that “SEBI found individual traders in derivatives market faced loss of Rs 1.8 lakh crore in 2021-24. A little more than half of them were from Maharashtra, Gujarat, UP & Rajasthan.”
Even more remarkable is the socio-economic strata from which these derivative traders hail: “The data from SEBI’s study …shows the bulk of these traders are below the age of 30, earn less than Rs 5 lakh a year, aren’t from India’s top-30 most populous cities, and are predominantly male.”
Basically, the derivative traders who are losing their shirts in the stock market – often to smart hedge funds trading from the global money centres – are low income, unemployed or underemployed men from small towns in north India. The stock market has become a vis media for the rich & the well informed to prey upon the poor & the ill informed.
Mr Raghavan writes: “The study said the proportion of traders in the F&O segment who were below 30 years jumped from 31 percent in 2022-23 to 43 percent in 2023-24, indicating a rising appeal of such trades among India’s youth. This is despite the fact that 93 percent of traders in this segment faced losses….The data found that 93 percent of young traders lost money on F&O trading in all three years analysed…
The proportion of low income traders has risen over the years, from 71 percent in 2021-22. This is despite the fact that this segment had the highest proportion of loss-makers. That is, 92.2 percent of low-income traders lost money in their F&O trades in 2023-24.
The “mid-income” category–comprising traders with annual incomes of Rs 5-25 lakh–was the next largest segment, making up 18 percent of F&O traders.
“With an exception of ‘Very High Income’ (incomes of more than Rs 1 crore a year) individual F&O traders, the percentage of loss-makers in F&O were inversely proportional to their income category,” the study said. “As traders’ annual income increased, the percentage of loss-makers in that category had declined.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
