Money
The reality of Indian trading boom: Platforms win, retail investors lose
Summary
- Most of the new retail investors are under 35, digitally savvy, and armed with user-friendly apps such as Zerodha, GROWW, and Upstox. Still, the financial outcomes have been dismal for the vast majority of these new entrants.
India’s retail trading revolution has delivered an uneven outcome. While new-age brokerage platforms are raking in record profits, millions of individual investors—particularly in the derivatives market—are nursing heavy losses. The paradox at the heart of India’s stock market boom is this: Technology has made trading more accessible, but not necessarily more profitable for the average participant.
Over the past four years, the number of demat accounts in India has soared from 40 million to 150 million. Most of these new investors are under 35, digitally savvy, and armed with user-friendly apps such as Zerodha, GROWW, and Upstox. Yet, even as participation in equity markets has exploded, particularly in high-risk segments like options trading, the financial outcomes have been dismal for the vast majority of these new entrants.
A new generation of brokers
A dramatic shift in the brokerage landscape laid the foundation for this trading surge. Legacy firms such as Motilal Oswal and ICICI Direct were slow to adapt to the mobile-first generation. In contrast, discount brokers embraced app-based platforms early, slashing fees and streamlining user experiences. By 2024, discount brokers accounted for 36% of total revenue and 44% of profits in the industry—figures that underscore how their low-cost, high-volume model has outperformed traditional players.
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Technology meets aspiration
This boom has been aided by factors uniquely Indian: low data costs, rising smartphone penetration, and a growing middle class with aspirations of financial independence. For the first time, millions could trade stocks and derivatives from the convenience of their phones, with minimal capital requirements and even less friction.
A market flooded with inexperienced traders
However, the excitement of democratization has masked an uncomfortable truth. According to the Securities and Exchange Board of India (Sebi), the number of individual traders in futures and options (F&O) nearly doubled between 2021-22 and 2023-24. Individuals now constitute almost all of the participants in this high-stakes segment—99.8% as of 2023-24. But with that surge came soaring losses. Out of 113 million individual traders during this period, over 105 million—nearly 93%—suffered net losses.
Options trading: A trap for the unwary
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. Alongside this surge, financial losses for retail participants have climbed alarmingly. In 2021-22, individual traders incurred net losses of ₹40,824 crore. This figure rose to ₹65,747 crore in 2022-23 and then further to ₹74,812 crore in 2023-24.
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Across the three years, total losses reached ₹1.81 trillion, borne by over 10.5 million traders—or nearly 93% of the 11.3 million individual participants. Options trading, which accounts for over 99% of F&O activity, has emerged as the central source of these losses. While 7.2% of traders made profits, these gains were mostly limited to seasoned participants or institutional players.
Too easy, too risky
These losses are not merely statistical. They represent the dashed hopes of first-time investors, many of whom were lured in by slick marketing campaigns and the illusion of quick wealth. Trading apps make it easy to enter the market, but few offer the financial education or risk warnings necessary to navigate its complexities. A 25-year-old with a smartphone and a UPI ID can begin trading leveraged derivatives within minutes. Understanding the consequences takes far longer.
A regulatory response in motion
In response, regulators have begun tightening the screws. Sebi has raised minimum contract sizes for index derivatives, introduced mandatory risk disclosures, and encouraged brokers to adopt suitability assessments. But regulation is chasing a market that’s evolving in real time. Technology moves faster than policy, and traders tend to learn only after they’ve incurred losses.
Toward a more balanced market
This is not to say that retail participation is a net negative. On the contrary, India’s markets 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 path forward
What’s needed now is a systemic recalibration. Brokers must move beyond onboarding toward educating. Platforms must shift from maximizing transactions to fostering sustainable investing behaviour. And regulators must remain proactive, ensuring that innovation doesn’t come at the cost of investor well-being.
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India's capital markets are poised for historic growth. But if that growth is to be equitable, the spoils of this trading boom cannot remain the preserve of platforms alone. Investors must not only be onboarded—they must be protected, informed, and empowered. Otherwise, the promise of democratized finance will ring hollow.
Views are personal.
Dr. Jayatu Sen Chaudhury is a professor of finance and analytics and Dr. Akhter M. Rather is an associate professor of analytics at Great Lakes Institute of Management, Gurugram.
