Indian equities have seen retail ownership increase more than fivefold since March 2020.
Credit: DH Photo/Pushkar V
New Delhi: Gaurav Sharma, who is in his early 40s, started trading directly in the stock market during the Covid lockdown. Initially, he invested Rs 50,000. After a few days, he booked a profit of around Rs 10,000. Gradually, he became a day trader. With just Rs 1 lakh, he was able to buy stocks worth up to Rs 10 lakh. As there was an upward trajectory in the overall market, he was making good profits day after day. On some days, he even booked profits of Rs 10,000 to Rs 15,000.
While the general economy was mired in doom and gloom, with job losses and salary cuts dominating the news, the stock markets seemed to be doing well.
“I was spending 10-12 hours every day at work. In the stock market, I was able to earn more money by putting in only a few hours,” Gaurav said, explaining how he got attracted to stock market trading. Subsequently, he quit his job to pursue stock trading full time. However, the market cycle reversed after a few months. Day trading started turning negative. Taking cues and tips from some YouTube experts, Gaurav ventured into futures and options (F&O) trading, which is considered more complex and risky.
“Initially, it seemed like a very easy way to earn money. But at times, nothing seemed to work. Net net, I am at a loss. I have stopped trading and taken up a job again,” he said.
Hyderabad-based techie Kartik Shankar has a similar story to tell. “During Covid, I had bought a put option for a popular automobile stock. In just a week, my Rs 20,000 became a profit of Rs 2 lakh. That’s when I got hooked on options trading,” said Kartik.
A put option is a derivative contract, where people trade contracts rather than the stocks, that allows you to lock in a future selling price for a stock by paying a small premium. People buy a put option when they expect a stock’s price to fall, because the steeper the fall, the larger the profit. However, if the stock price moves in the opposite direction, they lose the premium.
In Kartik’s case, his predictions came true at first, making trading a profitable venture for him. But his calculations backfired when he made a high-stakes bet in another case. He ended up losing Rs 4 lakh while trying to rescue a drowning trade position.
Lakhs of individuals, like Gaurav and Kartik, bet their money on futures and options, hoping to make quick profits. Data indicates that some succeed, but many end up losing money.
According to a report released by the Securities and Exchange Board of India (SEBI) recently, over 91% of individual traders in the equity derivatives segment incurred losses during the financial year 2024-25. A similar trend was witnessed in previous years as well.
Equity derivatives are instruments whose values are partly derived from one or more underlying equity asset classes. Futures and options are the most commonly-traded equity derivatives products. Around 93% of over one crore individual equity F&O traders incurred average losses of around Rs 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24.
Out of these, around four lakh traders or top 3.5% of loss-makers incurred an average loss of Rs 28 lakh each, while only 1% of individual traders managed to earn profits exceeding Rs one lakh.
Aggregate losses of individual traders during the three year period from FY22 to FY24 stood at over Rs 1.8 lakh crore. In the financial year that ended in March 2025, individual traders lost around Rs 1.05 lakh crore. The losses have been widening over the years. It rose from Rs 74,812 crore in 2023-24 to around Rs one lakh crore crore in 2024-25, as per SEBI data.
The income profile shows that most people losing money are from middle- and lower-middle-income families. Over 75% of individual F&O traders in FY24 had declared an annual income of less than Rs 5 lakh.
Despite consecutive years of losses, more than 75% of the loss-making traders continued trading in F&O during FY24, SEBI data showed.
Surge in retail participation
There has been a significant increase in retail investor participation in the Indian equity markets, especially after the Covid period.
The number of demat accounts has more than quadrupled, rising from 4.1 crore in March 2020 to over 21 crore in October 2025.
A demat account is used to hold shares and securities in an electronic (dematerialised) format. It is mandatory for stock market participation. Before dematerialisation, stock trading involved the use of physical share certificates. This system was slow, paper-intensive, and risky.
“If you look at the last five years, retail participation in Indian equities hasn’t just increased, it has transformed. Markets that once felt distant, complicated and dominated by institutions suddenly became accessible to everyone with a smartphone. Low-cost brokers, instant KYC, UPI-based payments and simple interfaces have removed almost every barrier that existed earlier,” said Nikunj Saraf, CEO of wealth management firm Choice Wealth.
But technology alone doesn’t explain the wave. The Covid period seems to have created a once-in-a-generation behavioural shift. People were indoors, incomes were relatively stable for many, savings went up, and markets bounced sharply after the March 2020 fall.
“For the first time, lakhs of people could see wealth creation in real time — and that changed everything,” Saraf said.
Ravi Singh, Chief Research Officer at Master Capital Services Ltd, said the surge in retail participation in the equity markets is because of a “mix of convenience, curiosity and the hope of better returns.”
“During Covid, there were very few other investment options giving decent returns, so markets naturally pulled investors in. Younger people see stocks as a way to grow money faster than FDs or real estate. Cheap brokerage, constant market content on social media and the sense that everyone is trading have only driven participation higher,” Singh said.
There is a more than five-fold increase in retail ownership in the Indian equities since March 2020. Individuals investing directly in the stock market or through mutual funds now own 18.5% of the over Rs 45 lakh crore Indian equity market.
The market capitalisation of all listed companies on the Bombay Stock Exchange (BSE) is now over one-and-a-half times of the country’s gross domestic product (GDP). The ratio climbed from around 56% in March 2020 to a peak of 154% in September 2024, when the key indices like Sensex of the BSE and Nifty of the National Stock Exchange (NSE) hit their respective record highs.
The total assets under management (AUM) of the Indian mutual fund industry have increased by around Rs 50 lakh crore over the past five years. Equity mutual fund AUM surged to Rs 33.27 lakh crore in July 2025 from Rs 7.37 lakh crore five years ago, registering a growth of 351% in around five years, as per the Association of Mutual Funds of India data.
“Seamless digital onboarding, abundant liquidity and the perception of quick profits have made equity markets, particularly the derivatives segment, appealing to younger participants,” said Prashanth Tapse, senior vice president at Mehta Equities.
However, this influx has not been matched by adequate financial literacy, leading many investors to engage in high-risk, speculative strategies without fully understanding their complexities. SEBI has highlighted that this gap between access and awareness has contributed to the disproportionately high loss ratios observed among retail derivative traders, Tapse added.
Over-financialisation
Low transaction costs and the flow of capital into innovative and risky economic activities are considered key characteristics of a developed financial system. India has made considerable progress in recent years in these areas. The financial sector plays a crucial role in economic growth. However, empirical evidence shows that excessive growth of financial markets can be counterproductive to the real economy. The global financial crisis in 2008 is a good case in point.
The Economic Survey 2024-25 has also cautioned against excessive financialisation saying it can hurt the economy. “The financial markets must grow in line with, but not faster than, the economy's capital needs and overall economic growth. As the country undergoes this significant transformation, it is crucial to be aware of the potential vulnerabilities that may arise,” the document tabled in parliament by Finance Minister Nirmala Sitharaman noted.
Uday Kotak, founder and director of Kotak Mahindra Bank, has also flagged the risk of over-financialisation saying over-reliance on financial instruments could potentially harm the economy. “Should we continue encouraging retail investors to keep buying? Retail investors in India are funneling money into equities daily, contributing to domestic institutional flows. Money from individuals from Lucknow to Coimbatore is flowing to Boston and Tokyo," he said at Kotak Institutional Equities' investor conference in February.
When the economy reaches a state of over-finance, the financial sector starts competing with the real sector for resources. This competition for resources is especially seen in the case of skilled labour, which gets absorbed into the financial sector at the cost of the real economy, the Economic Survey noted.
Impact on bank deposits
There has been a marked shift in household savings, away from traditional bank deposits. The share of household deposits in total bank deposits fell to 60% in 2024-25 from 64% in 2019-20. Non-financial corporations filled this gap. In term deposits (TDs) category, the share of households has decreased from 58% to 54% during this five year period.
“This shift has implications for deposit stability and costs, as corporate depositors tend to be more rate sensitive and prefer shorter tenures,” said Subha Sri Narayanan, Director, Crisil Ratings.
“During periods of tight liquidity, this behaviour can potentially lead to faster deposit outflows and increased funding costs for some banks. Looking ahead, as alternative investments continue to gain popularity, we expect the share of household deposits to decline further,” Narayanan said.
The share of low-cost current account and savings account (CASA) deposits ratio fell to 36% as of June 2025, down from a 25-year-high of over 42% in March 2022.
Net financial savings dropped from Rs 23.3 lakh crore in 2020-21 to Rs 17.1 lakh crore in 2021-22 and further to Rs 14.2 lakh crore in 2022-23, as per the Ministry of Statistics and Programme Implementation data.
Household savings have traditionally been the bedrock of India's financial system. The growth and composition of deposits determine the cost of lending and influences the stability of the banking system. India has historically relied on domestic savings to fund infrastructure and other developmental projects.
The shift in household savings away from the traditional deposits could make banks more vulnerable and pose significant risks to the economy.
(With inputs from Shree D N in Bengaluru)