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 to 2023, highlights a dramatic increase in individual traders, 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 percentage 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. In FY19, there were approximately 1.49 million traders. This number skyrocketed to 7.83 million in FY22, likely fueled by the pandemic's lockdowns that encouraged many to explore stock trading as a potential income source. However, the number slightly decreased to 6.89 million in FY23, suggesting a stabilization in the market.

Financial Performance Concerns

Despite the surge in participation, the financial outcomes for many traders have been troubling. In FY23, a staggering 71% of intraday traders reported losses, a notable increase from 65% in FY19. This trend raises concerns about the risks associated with intraday trading, as more individuals enter the market without adequate knowledge or experience.

Demographic Shifts In Trading

The demographic profile of intraday traders has undergone significant changes:

• Age: The proportion of traders under 30 years old has surged from 18% in FY19 to 48% in FY23, indicating a younger demographic is increasingly engaging in trading activities.

• 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 space.

Geographic Spread Of Traders

The study also reveals a dramatic geographic expansion in trader participation:

• Tier-1 Cities: Participation increased threefold.

• Tier-2 Cities: Participation grew fivefold.

• Tier-3 Cities: Participation surged tenfold.

This expansion suggests that interest in intraday trading is no longer confined to major metropolitan areas, but is spreading to smaller cities and towns across India.

Changing Trading Patterns

The analysis of trading behavior shows a notable increase in participation from smaller investors. 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 trend indicates that more individuals are entering the market, possibly attracted by the accessibility of 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 increase in participation is encouraging, the high percentage of loss-making traders highlights the need for enhanced education and support for new entrants. As the market continues to evolve, regulators and industry participants must work together to ensure that traders are equipped with the necessary tools and knowledge to navigate the complexities of intraday trading effectively.

Sources

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