Sebi chairman Madhabi Puri Buch on Monday spoke about the risks of investing. She says she is confused and surprised by investor interest in futures and options (F&O), despite 90 percent of people losing money in this segment.
Speaking at the launch of the Investor Risk Reduction Access (IRRA) platform on the BSE in Mumbai, the Sebi chief said it is necessary for investors to look at the long term and added that the chances of inflation-reducing returns are much higher by this strategy.
Profits and losses in the futures and options segment
Only 11 per cent of the 45.24 lakh individual traders in the F&O segment made profits, she said, citing a recent survey by capital markets regulator Sebi.
According to the study, there was an exponential increase in participation in the F&O segment during the pandemic, with the total number of unique individual traders increasing by over 500 percent, compared to 7.1 lakh in FY19.
“I have to admit, I’m always a little confused and surprised as to why people keep doing that (betting on F&O), knowing that the odds are not in their favor at all,” Buch said. “There is a 90 percent chance that the investor will lose money in the F&O segment, but we also know, and the data shows us, that if you have a long-term view of the market, and if you invest with a long view , -term perspective you will rarely go wrong,” she added.
According to the Sebi research paper, the average loss incurred by 89 percent of people who lost money on F&Os in FY22 was Rs 1.1 lakh, while for the minority lucky enough to be in the black, the average profit was Rs 1.5 amounted to. lakh. More than a third of investors in the F&O segment were between 20 and 30 years old, compared to just 11 percent in FY19.
Go for long-term investments: Buch
Bush said that if the investment calls are long-term, there is a “very good chance” that an investor will create wealth over an extended period of time that will outpace inflation in the economy.
She urged investors to take action and adopt a sustainable, long-term approach to investing that has a high probability of creating wealth, rather than losing money on a daily basis in the F&O segment.
New standards for upstreaming funds coming soon
Buch said Sebi will come out with a revised notification on upstreaming of funds after receiving feedback from brokers on the challenges in meeting norms. She also said the brokerage industry and exchanges appear to have reached agreement on 50 topics aimed at operational simplification and standard setting, and commended stakeholders for their collaboration.
Access platform for risk reduction for investors
Sebi had first announced the introduction of IRRA, under which a trader can call on an open position if its broker’s system faces a glitch – in December 2022. Buch said efforts have been made to implement a achieve “perfect balance” between market requirements. worst-case scenario to provide the alternative and cost of creating such capacity, and hoped the system could deliver on the promise.
According to an industry official, a trader will receive a text message with a link to download the IRRA in case his or her broker experiences an outage and can settle open positions in less than two hours.
(With PTI inputs)