F&O Trading Losses in FY24: SEBI Data Reveals Majority of Traders, Whether 'New' or 'Regular', Incurred Losses

Key Highlights from SEBI Data:

• New Traders in FY24: 42 lakh new Futures and Options (F&O) traders entered the market during FY24. These new traders, defined by SEBI as those who placed their first trades within the last three years, accounted for nearly half of all traders in the fiscal year.

• Significant Losses for New Traders: According to SEBI's data, a staggering 92.1% of these new traders suffered losses, averaging a net loss of approximately ₹46,000 per trader in FY24.

• Losses Not Limited to New Traders: While new traders incurred losses, experienced or "Regular Traders" were not exempt. SEBI defines regular traders as those who have been active in F&O trading for three consecutive years (FY22 to FY24). In FY24, about 88% of regular traders faced losses, averaging a substantial ₹1.50 lakh per person.

• Deepening Losses Amid Market Highs: Despite the broader markets reaching new highs during the fiscal year, the data showed that loss-making traders experienced deeper losses compared to the profits of those who did make money. On average, loss-making traders suffered a loss of ₹1.20 lakh per person, while profit-making traders earned ₹1.03 lakh per person.

• Cost of Transactions: Another significant factor adding to traders' woes was the cost of transactions. SEBI's study showed that traders who incurred losses faced a higher transaction cost relative to their losses. Losing traders bore about 27% of their transaction costs on top of their net losses, while profitable traders incurred approximately 22% of transaction costs as a percentage of their gross profits.

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Analysis of SEBI's Findings:

The data highlights a key trend in F&O trading: whether a trader is new or experienced, the derivative market has been unforgiving, with most participants ending up in the red. While many new traders are drawn to the market with hopes of quick profits, the reality revealed by SEBI is that only a small fraction manage to consistently earn a profit, and even those who do often face high transaction costs.

The losses of new traders, who accounted for a significant portion of the market, could be attributed to factors such as lack of experience, high transaction costs, and the complexities of F&O trading, which is often dominated by more seasoned investors or institutional players. The heavier losses for regular traders suggest that even those with experience are not immune to the challenges of F&O markets, where volatility and leverage can lead to significant financial setbacks.

Implications for Retail Investors:

For retail investors considering entering the F&O market, SEBI's data serves as a cautionary tale. The high percentage of loss-making traders underlines the risks inherent in F&O trading, which may not be suitable for all investors. Additionally, the report suggests that traders should be mindful of transaction costs, which can further erode their returns, especially for those already facing losses.

Conclusion:

SEBI's data on F&O trading in FY24 offers a sobering reminder of the challenges faced by traders, particularly new entrants. The high percentage of loss-making traders and the significant financial losses incurred indicate that caution, experience, and careful risk management are critical for anyone participating in these markets.

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Jyothy Labs Expands with Strategic Quiclo Acquisition: Shares Surge 2%

Jyothy Labs saw its stock rise 2% to ₹556 in early trading on September 20, 2024, following the acquisition of the Hyderabad-based laundry service brand Quiclo, owned by Smartwash Solutions Private Limited. The deal, valued at ₹70 lakh plus taxes, is expected to bolster Jyothy Labs' footprint in the laundry and dry-cleaning services sector, particularly in Hyderabad.

Strengthening Presence in Laundry Services
This strategic acquisition includes Quiclo's software and customer database, allowing Jyothy Labs to expand its customer base and enhance its operations in the laundry services space. The company's laundry and dry-cleaning unit in Hyderabad has already commenced commercial operations, adding to its growing portfolio of services.

Growth and Profitability
Jyothy Labs recently reported a 5.7% rise in net profit for the first quarter of FY25, posting ₹101.7 crore compared to ₹96.3 crore in the same period last year. The company remains optimistic about the growth prospects, particularly with the expected uptick in rural demand, driven by a favorable monsoon season.

Focus on Rural Distribution and E-commerce
The management is sharpening its focus on rural markets, improving distribution channels, and introducing new product categories to meet diverse consumer needs. There is also a concentrated effort on increasing Jyothy Labs' presence across e-commerce platforms, boosting both visibility and sales.

Investor Sentiment
At 11:16 AM on September 20, shares of Jyothy Labs were trading at ₹550 on the NSE, reflecting a 25% rally over the past three months. Investors are optimistic about the company's future growth, thanks to its recent strategic moves and strong operating performance.

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DIIs and FIIs Boost Market Momentum: Key Trends and Insights

DIIs Net Buy ₹874 Crore, FIIs Add ₹483 Crore in Market Surge

On September 17, 2024, Domestic Institutional Investors (DIIs) and Foreign Institutional Investors (FIIs) injected fresh capital into the stock market, leading to significant market activity. DIIs made net purchases of ₹874 crore, while FIIs added ₹483 crore worth of shares, as per provisional data from the NSE.

Key Market Movements:

• DIIs bought shares worth ₹10,960 crore and sold equities worth ₹10,086 crore.
• FIIs purchased stocks valued at ₹13,095 crore, while selling ₹12,613 crore during the same trading session.

Year-to-Date Overview:

• FIIs have been net sellers this year, offloading stocks worth ₹1.33 lakh crore.
• In contrast, DIIs have been consistent buyers, accumulating shares worth ₹3.30 lakh crore so far in 2024.

Market Performance: The trading day saw a slight uptick, with the Sensex closing 80 points higher at 83,068, a 0.1% increase, and the Nifty adding 34 points, settling at 25,418.50. Despite this, the overall market sentiment remained mixed, as 1,616 stocks advanced while 2,176 stocks declined.

Sectoral Gains and Losses: Sectors such as Nifty Realty, Consumer Durables, and Auto led the gains, while Media, PSU, and Metal sectors posted losses, reflecting the uneven market sentiment.

Expert View: Vikram Kasat, Head of Advisory at PL Capital, highlighted the cautious market outlook, citing global macroeconomic pressures and a weakened rupee as contributing factors. He emphasized that while some sectors showed strength, upcoming policy announcements are keeping investors on edge.

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DIIs and FIIs Active in the Market: Net Purchases of ₹97 Crore and ₹975 Crore Respectively

On September 4, 2024, Domestic Institutional Investors (DIIs) net bought shares worth ₹97.35 crore, while Foreign Institutional Investors (FIIs) were net buyers of ₹975.46 crore, according to provisional data from the NSE. DIIs purchased ₹13,584 crore worth of shares and sold ₹13,487 crore, whereas FIIs acquired ₹16,585 crore in shares and sold equities valued at ₹15,610 crore during the session.

Year-to-date, FIIs have net sold shares worth ₹1.36 lakh crore, while DIIs have net bought shares totaling ₹3.11 lakh crore.

In market performance, the Sensex closed down by 202.80 points or 0.25% at 82,352.64, and the Nifty fell by 81.15 points or 0.32% to 25,198.70. Top gainers on the Nifty included Asian Paints, Grasim Industries, HUL, Apollo Hospitals, and Sun Pharma, while the biggest losers were Wipro, Coal India, ONGC, Hindalco Industries, and M&M.

Sector-wise, FMCG, realty, and pharma stocks saw gains, while auto, banking, energy, IT, and metals sectors faced declines. Siddharth Khemka of Motilal Oswal Financial Services noted that despite global concerns causing a dip, domestic equities showed resilience with a gradual recovery.

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Market Update and Trading Plan for Nifty and Bank Nifty

The market closed with a positive bias on September 3, continuing its upward journey for the 14th consecutive session. Most experts predict that the ongoing consolidation may break out on the higher side. If the Nifty closes above 25,300, the immediate target is 25,400, with support levels at 25,200 and 25,000. For Bank Nifty, holding above 51,500 could push it to 52,000, with key support at 51,000.

 

Nifty Outlook and Strategy:

Ashish Kyal, Waves Strategy Advisors:

  The Nifty is consolidating at the higher end, with a breach below 25,180 being a concern. The trend remains positive, with a target of 25,361 (Gann).

Ø  Key Resistance: 25,650 (September Futures)

Ø  Key Support: 25,180 (September Futures)

Ø  Strategy: Create long positions on a break above 25,420 with a stop-loss at 25,340 and a target of 25,550, followed by 25,650.

 

 Apurva Sheth, SAMCO Securities:

  Despite the 14-day winning streak, September has historically been a negative month for Nifty. Expect a flat to negative bias in the near term.

Ø  Key Resistance: 25,395, 25,500, 26,000

Ø  Key Support: 25,000, 24,800, 24,500

Ø  Strategy: Employ a Call Ratio Spread strategy with a target profit of Rs 3,500 or exit if losses exceed Rs 2,000.

 

Riyank Arora, Mehta Equities:

  The Nifty could move towards 25,500 and 25,600 levels, with potential to reach 26,000 eventually.

   Key Resistance: 25,500, 25,600

   Key Support: 25,200, 25,000

   Strategy: Buy at CMP of 25,280 with a stop-loss at 25,200, targeting 25,500 and 25,600.

 

Bank Nifty - Outlook and Positioning:

Ashish Kyal, Waves Strategy Advisors:

  Bank Nifty closed above the previous day's high, signaling a positive trend. The index has maintained its low since August 14, suggesting a bullish outlook.

Ø  Key Resistance: 52,100 (September Futures)

Ø  Key Support: 51,300 (September Futures)

Ø  Strategy: Long positions above 51,900 with a target of 52,100, followed by 52,390, as long as 51,500 holds.

 

 Apurva Sheth, SAMCO Securities:

  Bank Nifty has underperformed but is now showing signs of recovery. Closing above 51,500 indicates bullish momentum, with private sector banks leading.

Ø  Key Resistance: 52,000, 53,000

Ø  Key Support: 51,500, 51,133

Ø  Strategy: Execute a Bull Call Spread by buying a 51,800 strike Call and selling a 52,500 strike Call for the September 11 expiry. Target profit is Rs 6,000.

 

 Riyank Arora, Mehta Equities:

  Bank Nifty has broken above 51,500, signaling targets of 52,000 and 52,500. Strong buying momentum in banking stocks supports this bullish trend.

Ø  Key Resistance: 52,000, 52,200

Ø  Key Support: 51,400, 51,000

Ø  Strategy: Buy at CMP of 51,689, with a stop-loss at 51,400, targeting 52,000 and 52,500.

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