Post-COVID Surge in Intraday Trading: SEBI Study Unveils New Trends

The Securities and Exchange Board of India (SEBI) has released a comprehensive study revealing significant changes in intraday trading patterns following the COVID-19 pandemic. The analysis, which spans fiscal years 2019, 2022, and 2023, highlights a dramatic increase in individual trader participation, alongside concerning trends in financial performance and demographic shifts.

Key Takeaways

• Surge in Participation: Intraday traders increased from 1.49 million in FY19 to 7.83 million in FY22, before slightly declining to 6.89 million in FY23.

• Financial Performance: 71% of intraday traders reported losses in FY23, up from 65% in FY19.

• Demographic Shifts: The proportion of traders under 30 years old rose from 18% in FY19 to 48% in FY23, while female participation decreased from 20% to 16%.

• Geographic Expansion: Participation from Tier-1, Tier-2, and Tier-3 cities increased significantly, indicating broader market engagement.

Surge In Trader Participation

The SEBI study indicates a remarkable increase in the number of individual intraday traders. Before the pandemic, in FY19, there were approximately 1.49 million traders. This number skyrocketed to 7.83 million in FY22, reflecting a surge in interest during the pandemic lockdowns. However, the number slightly decreased to 6.89 million in FY23, suggesting a stabilization in market participation.

Financial Performance Concerns

Despite the increase in participation, the financial outcomes for many traders have been troubling. In FY23, a staggering 71% of individual intraday traders reported losses, a notable rise from 65% in FY19 and 69% in FY22. This trend raises concerns about the risks associated with intraday trading, as more individuals enter the market without adequate preparation or understanding of the complexities involved.

Demographic Shifts In Trading

The demographic profile of intraday traders has undergone significant changes:

• Age: The share of traders under 30 years old has surged from 18% in FY19 to 48% in FY23, indicating a younger demographic entering the trading space.

• Gender: Conversely, the participation of female traders has declined from 20% in FY19 to 16% in FY23, highlighting a potential area for improvement in attracting women to the trading market.

Geographic Spread Of Traders

The study also reveals a dramatic increase in participation from various city tiers:

• Tier-1 Cities: Participation increased threefold.

• Tier-2 Cities: Participation grew fivefold.

• Tier-3 Cities: Participation surged tenfold.

This expansion suggests that intraday trading is becoming more accessible to individuals outside major metropolitan areas, reflecting a broader interest in stock trading across the country.

Changing Trading Patterns

The analysis further explored the trading behaviors of different trader categories. Notably, the share of 'Very Small' traders, defined as those with an annual intraday turnover of less than INR 50,000, has doubled from 27% in FY19 to 56% in FY23. This shift indicates a growing number of smaller investors entering the market, likely driven by the accessibility of online trading platforms and the allure of quick profits.

Conclusion

The SEBI study underscores a significant transformation in the landscape of intraday trading in India post-COVID. While the surge in participation is promising, the high percentage of loss-making traders highlights the need for enhanced education and support for individual investors. As the market continues to evolve, regulators and market participants must prioritize strategies to equip traders with the knowledge and tools necessary to navigate the complexities of intraday trading effectively.

Sources

• SEBI Study Reveals Dramatic Shift in Intraday Trading Trends Post-COVID, Investing.com India.