The reality of Indian trading boom: platforms win, retail investors lose

Copyright © HT Digital Streams Limit all rights reserved. Money Jayatu Sen Chaudhury, Akhter M. Rather 4 min Read 09 Apr 2025, 03:16 PM IST At 2024, discount brokers accounted for 36% of total turnover and 44% of the profits in the industry. (Image: Pixabay) Summary Most of the new retail investors are under 35, digitally skilled and armed with user -friendly programs such as Zerodha, Groww and Upstox. The financial outcomes were still a bad thing for the vast majority of these new entrants. India’s retail trade -revolution has delivered an uneven result. While new age brokerage platforms earn record profits, millions of individual investors-especially in the derivative derivative markets-very losses. The paradox in the heart of India’s stock market boom is: Technology has made trade more accessible, but not necessarily more profitable for the average participant. Over the past four years, the number of Demat accounts in India has risen from 40 million to 150 million. Most of these new investors are under 35, digitally skilled and armed with user -friendly programs such as Zerodha, Groww and Upstox. But even though participation in stock markets exploded, especially in high -risk segments such as options trading, the financial outcomes for the vast majority of these new entrants were ominous. A new generation of brokers A dramatic shift in the brokerage landscape laid the foundation for this surge in trade. Legacy firms such as Motilal Oswal and ICICI Direct were slow to adapt to the mobile first generation. In contrast, discount brokers grabbed the app-based platforms early, reduced fees and streamlined user experiences. At 2024, discount brokers made up 36% of total turnover and 44% of industry profits underlined figures that underlined how their low-cost, high-volume model performed better than traditional players. Also read: Game or gambling? Young Indians become addicted to ‘opinion trading’, and the loss of large summer technology meets the pursuit. This revival is helped by factors that are unique Indian: low data costs, rising smartphone invasion and a growing middle class with pursuit of financial independence. For the first time, millions of shares and derivatives were able to trade from the ease of their phones, with minimal capital requirements and even less friction. However, a market flooded with inexperienced traders has masked the excitement of democratization an uncomfortable truth. According to the Securities and Exchange Board of India (Sebi), the number of individual traders in futures and options (F&O) doubled almost between 2021-22 and 2023-24. Individuals now form almost all participants in this segment with high interest-99.8% from 2023-24. But with the boom, rising losses came. Out of 113 million individual traders during this period have more than 105 million – almost 93% – net losses. Options trading: A trap for the unconscious The number of individual traders in the F&O segment jumped from 4.27 million in 2021-22 to 8.63 million in 2023-24. In addition to this revival, financial losses for retail participants have climbed alarmingly. In 2021-22, individual traders entered into net losses of £ 40,824 crore. This figure rose to £ 65,747 in 2022-23 and then further to £ 74,812 crore in 2023-24. Also read: Sips Stop, Demat accounts Slum: Are retail investors scared? Over the three years, total losses reached £ 1.81 billion, carried by more than 10.5 million traders – or nearly 93% of the 11.3 million individual participants. Options trading, which accounts for more than 99% of the F&O activity, has emerged as the central source of these losses. While 7.2% of traders earned profits, these profits were mostly limited to seasoned participants or institutional players. Too easy, too risky these losses are not just statistical. They represent the hope of investors for the first time, many of whom have been attracted by smooth marketing campaigns and the illusion of rapid wealth. Trading programs make it easy to enter the market, but few provide the financial education or risk warnings needed to navigate its complexities. A 25-year-old with a smartphone and an UPI ID can start trading leverage within minutes. It takes much longer to understand the consequences. A regulatory response that was in response to answer began to turn the screws. Sebi has raised minimum contract sizes for index divorers, set up compulsory risk disclosures and encouraged brokers to adopt suitability assessments. But regulation is chasing a market that develops in real time. Technology moves faster than policy, and traders tend to learn only after suffering losses. In a more balanced market, that’s not to say that retail participation is a net negative. On the contrary, the markets of India are stronger with broader investor inclusion. But participation alone is not empowerment. Without financial literacy, transparent tools and responsible platform design, accessibility becomes a double -edged sword. The way forward needed now is a systemic recalibration. Brokers must go beyond on board education. Platforms must proceed from maximizing transactions to the promotion of sustainable investment behavior. And regulators must remain proactive and ensure that innovation does not come at the expense of investors. Also read: Mint Quick Edit | Shares: Retail investors buy the Dips India’s capital markets are ready for historical growth. But if the growth is to be fair, the spoils of this trading boom cannot remain the conservation of platforms alone. Investors should not only be on board – they need to be protected, informed and empowered. Otherwise, the promise of democratized finance will be hollow. Views are personal. Dr Jayatu Sen Chaudhury is a professor of finance and analysis and Dr. Akhter M. is rather an associate professor in analysis to the Great Lakes Institute of Management, Gurugram. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #stock Markets #trading #Futures and Options #Deivatives Boom #demat -Accounts #Retail Investors Mint Special