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 trends following the COVID-19 pandemic. The analysis, which spans fiscal years 2019 to 2023, highlights a dramatic increase in individual trader participation, alongside concerning financial outcomes for many.

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.

• Trading Patterns: The share of 'Very Small' traders has doubled, reflecting increased activity among smaller investors.

Surge In Participation

The SEBI study indicates a remarkable rise 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, likely fueled by the lockdowns that prompted many to explore stock trading as a new avenue for income. However, the number slightly decreased to 6.89 million in FY23, suggesting a stabilization in the market.

Financial Performance Concerns

Despite the increase in participation, the financial outcomes for many traders are alarming. In FY23, a staggering 71% of intraday traders reported losses, a significant rise from 65% in FY19 and 69% in FY22. This trend raises concerns about the risks associated with intraday trading, particularly for new entrants who may lack experience and knowledge.

Demographic Shifts

The demographic profile of intraday traders has undergone notable changes:

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

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

Geographic Expansion

The study also reveals a significant geographic shift in trader participation. The number of traders from various city tiers has expanded dramatically:

• Tier-1 Cities: Participation increased by 3x.

• Tier-2 Cities: Participation increased by 5x.

• Tier-3 Cities: Participation increased by 10x.

This expansion indicates a growing interest in intraday trading beyond major metropolitan areas, suggesting that more individuals across India are engaging with the stock market.

Changing Trading Patterns

The analysis of trading behavior shows a marked 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 may be attributed to 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 surge in participation reflects a growing interest in the stock market, the rising 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 work together to ensure that traders are equipped to navigate the complexities of intraday trading effectively.

Sources

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