Sharekhan’s Survey  unveils reasons behind investors losing money in Futures & Options Trading—an issue flagged by SEBI

Mumbai, December xx, 2023 – Sharekhan, has released its report titled 'Serious About The Markets'. This report came on the back of the market regulator--SEBI's report which revealed that 9 out of 10 individual traders in the equity Futures & Options segment incurred an average loss of ?1.1 lakhs during FY 2022, with a majority operating in the Options segment.

Sharekhan’s report is based on the survey regarding the seriousness and challenges faced by newcomers in the Futures & Options segment. The survey for this report was conducted by Kantar across India, encompassing a diverse participant pool representing various demographics and geographical regions, ensuring the credibility and depth of the findings.

The study highlights the challenges and perceptions of newcomers in the Futures & Options (F&O) segment. Some of these are:

1. 32% of novice F&O traders struggle with market analysis.

1. 13% of traders attribute their losses to inadequate trading knowledge.
2.  Cumulatively, 45% traders lack of sufficient understanding as a major factor in their losses.
3. 55% of the traders resort to buying more to offset their losses

Jean-Christophe Gougeon, Sharekhan's Chief Marketing Officer, expressed “While we were happy to find out that new comers are quite aware of the risks and their own lack of knowledge we are concerned about the survey’s findings on the approaches taken to decide where to trade in F&O and the lack of required discipline when it comes to trading. We sincerely urge everyone not to take a casual or short-cut approach and to either take help from SEBI registered professionals, full-service brokers or do their own proper research before they enter the F& O segment. Our new campaign is in this direction to help new comers be more aware about the casual approaches that one should avoid”

Findings from Sharekhan’s 'Serious About the Markets' Survey highlight challenges faced by Newbie Traders:

1. Misplaced Expectations:

- 40% of novice traders were allured to F&O trading due to quick and easy profits.

- 48% traders believed that a significant portion (30% to 50%) of traders consistently achieve 'good returns' from F&O trading. This indicates unrealistic perceptions among new comers in the market community.

2. Dependence on Non-Professional Advice: 

- 53% of traders relied on inputs from family, friends, and information trending on social media platforms leading to uninformed decisions and consequently higher risks.

3. Lack of Applying Strategies:

- 35% of traders did not implement any specific trading strategies.

- Unable to execute strategies like 'straddle and strangle', inspite of theoretical knowledge.

- Only 5% of traders utilised algorithmic strategies provided by specialised companies or websites.

4. Inadequate Use of Stop-Loss:

42% of traders consistently employed Stop-Loss orders in half of their trades, while 16% rarely use them. Thus, effective risk management through Stop-Loss orders was underutilised, posing a significant risk to traders' portfolios.

These findings underscore a concerning gap in practical knowledge among emerging traders in the financial sector.

In response, Sharekhan has partnered with Stocktwits to launch an educational video series titled "Let's Get Serious" which would facilitate interaction with over 50 SEBI registered research analysts and investment advisers (RA’s and RIAs) and contribute to education of retail investors.

[Stocktwits is a prominent social community of investors and traders based in the United States, and has recently expanded its presence in India. Central to their approach in the Indian market is the provision of a platform for SEBI Registered Analysts to actively contribute to the education of the upcoming generation of retail investors.]

Sharekhan and Kantar Highlight the Urgent Need for Trader Education in the Futures & Options Market 

Gaurav Dua, Head of Capital Market Strategy at Sharekhan, adds: “The recent study’s findings serve as a crucial wake-up call for traders, particularly those new to the F& O market. It starkly highlights the urgent need for robust advisory services and comprehensive education in the trading community. At Sharekhan, we recognize the critical nature of this gap and are deeply committed to bridging it. Our focus is on providing our clients with highly informed and strategic research recommendations, tailored to various risk profiles. We aim to empower our clients with the knowledge and tools necessary to navigate the complexities of the F& O market more effectively and confidently. Our goal is to transform their trading journey into a more successful and sustainable one, underpinned by solid strategies and sound decision-making.”

Anand Parameswaran, Executive Director & Head of BFSI Practice at Kantar, adds: “This study is done in partnership with Sharekhan has uncovered many interesting but concerning trading practices of newbie traders in the Futures & Options segment. It is important for investors to have a more disciplined approach and incorporate more diligence & rigor in their research before investing their hard-earned money.

Based on the findings of the report, Sharekhan recommends F&O traders to seek professional advice and education. The in-house Sharekhan Classroom modules and the “Power Money” webinars offered by its subsidiary Sharekhan Education’s offer a range of learning modules, reflecting the  brand’s commitment to an informed & serious approach for succeeding in the stock market. These education initiatives aim to improve trading outcomes and foster a more informed and strategic trading community.

About Sharekhan: 

1. Founded in 2000 and a subsidiary of BNP Paribas since November 2016, Sharekhan was one of the first brokers to introduce online trading in India. With a client base of over 30 lakhs, 120 branches, and 4200 business partners, Sharekhan’s full-service model is ‘Designed for the Serious’. Sharekhan is renowned for its comprehensive range of trading and investment solutions, including equities, futures and options, portfolio management services, research, mutual funds, experienced relationship managers and investor education. On average, Sharekhan executes more than 9 Lakh trades daily.
2. AsiaMoney Broker Poll 2023: Sharekhan was ranked No.1 in India for Best Retail Brokerages by Asiamoney Broker Poll 2023
3. Marksmen Daily 2024-25: Sharekhan was recognized as one of the Most Trusted Brands of India for the 2^nd time in a row by Marksmen Daily.
4. Dun & Bradstreet 2024: Sharekhan was featured among Dun & Bradstreet’s Leading BFSI (Banking Financial Services and Insurance) and FinTech Companies of India in 2024.

About BNP Paribas:

BNP Paribas Group, a leading international financial institution, has been operating in India since 1860. Offering a wide range of financial services, BNP Paribas covers corporate and institutional banking, as well as personal investment services for individuals. As the second oldest foreign bank in India, BNP Paribas has received accolades such as "Best International Corporate Bank for India" from Asiamoney in both 2022 and 2023.