DBT Bureau
Bengaluru, 7 October 2024
India’s demographic profile makes it one of the favourite destinations of foreign investment. With an approximate 65% of total population below 35, the country remains best-placed to drive the global economic growth.
However, lack of employment opportunities and skillsets are prompting many youngsters to try their luck in high risk F&O (future & option) trades of Indian market. Some youngsters are also lured by quick-rich propaganda of finfluencers to opt for these high risk derivative trades.
According to data released by the market regulator, SEBI; the proportion of young traders, who are below 30 years, has increased significantly from 31% in FY23 to 43% in FY24. Importantly, this age group also had the highest number of loss-markers. Around 93% of traders in this age group lost money in FY24.
These data points indicate that many novices are taking a plunge in the market without understanding the risks involved in these instruments.
SEBI report also stated that institutional traders had a clear upper hand in these high-risk derivative trades as compared to individuals. Proprietary traders, FPIs, and DIIs emerged as winners in the Indian market with huge gains from F&O trade. This was possible on the back of sophisticated algorithm that these traders possessed.
As compared to such sophisticated players, individual & young traders, who played the derivative trades on smart phones, turned out to be losers.
Worryingly, these young people, who are taking exposure to such instruments, are not high earners. More than 75% of all traders, who lost money in F&O trade, had an annual income of less than Rs 5 lakh per annum. Only 6% of all F&O traders had an income of more than Rs 10 lakh.
In line with their annual income profiles, these young traders mostly hailed from small towns. The data showed that rising number of F&O traders were from small towns, which are Beyond 30 (B30) cities.
These trends show that desperate young people see derivative trade as a source of income in small towns due to lack of employment opportunities. Unfortunately, social media influencers have a big role to play in alluring these young people towards financial ruin. In this context, SEBI’s recent measures to curb the F&O trade by increasing the capital limit is a welcome move.
