Are married men better at making profits in trading?

Though, the data may not capture a general practice of the same male traders operating on their spouse’s (wife) account simultaneously to take advantage of the higher tax slab of female individuals

The alarming situation is that over 70 per cent of the individual intraday traders (7 out of 10) in equity cash segment incurred net losses in FY23. Proportion of loss makers further to 80 per cent for traders with very frequent trading (individuals indulging in more than 500 intraday trades in a year) activity

The recent SEBI (Securities and Exchange Board of India) study on intraday traders reveals some very interesting insights not just into the mind and psyche of individuals but also across the demographics and regions. About one-third of the individuals who trade in equity cash segment, trade intraday. The share of young intraday (age less than 30 years) has grown to 48 per cent in FY23 versus 18 per cent in FY19. While the share of ‘very small’ traders (annual intraday turnover of less than Rs50,000) increased to a whopping 56 per cent from 27 per cent in FY19.

The alarming situation is that over 70 per cent of the individual intraday traders (7 out of 10) in equity cash segment incurred net losses in FY23. Proportion of loss makers further to 80 per cent for traders with very frequent trading (individuals indulging in more than 500 intraday trades in a year) activity. The percentage of loss makers for younger traders was higher i.e., at 76 per cent in FY23 as compared to other age groups. Even after three years of experience, (individuals who traded intraday during FY19, FY22 and FY23) 54 per cent of traders were loss-makers in FY23 but this reflected a much lower percentage as to overall loss-making (71 per cent) in FY23.

The survey further found that the distribution of turnover of individual traders is highly skewed. The bottom 78 per cent traders by intraday turnover (aggregate of purchase and sale values of intraday trades in a year) accounted for less than 1 per cent of the total intraday turnover of all individual traders in FY23. On the other hand, the top 6 per cent of traders accounted for more than 90 per cent of the turnover. The average number of trades by loss-makers was higher than the profit-makers.

During FY23, 76 per cent of individual traders with annual intraday turnover more than Rs1cr were loss-makers. These incurred an average P/L of negative (-) Rs 34,997 during the period. The average profits by the profit-makers were Rs89,172 while the average loss by loss-makers was Rs74,575 during FY23. Trading costs increased for those who traded very frequently. The loss-makers exacerbated their trading losses by 57 per cent due to trading costs. Profit-makers incurred 19 per cent of their trading profits as trading costs in FY23.

The survey also highlighted that women intraday traders make lower proportion of losses as compared to men. Female traders had a lower share of loss-makers than male traders since FY19, according to the study. The proportion of female loss-making traders was 66 per cent in FY23 while that of the male loss-makers stood higher at 72 per cent. Likewise, the share of women profit-traders was higher at 33 per cent compared to male profit-makers at 28 per cent.

Though, the data may not capture a general practice of the same male traders operating on their spouse’s (wife) account simultaneously to take advantage of the higher tax slab of female individuals. Those who may not have the original source of income but helps in lowering the overall tax outflow. So, the trading outcome can’t be completely attributed to the gender differentiated but still can’t be ignored.

The survey also makes an interesting interpretation of better trading outcomes or profits attributing to marriage. It’s found that married traders not only experienced lower proportion of losses but also formed a higher proportion of profits. Though, the results didn’t discount the other factors associated like the market experience and age, older traders handle derivative trading with more caution than those of the young.

The study revealed the penetration of trading in equity has penetrated much beyond the cities. The participation of individual traders from Tier1, Tier2 and Tier3 cities has increase by 3x, 5x and 10x respectively in FY23 compared to FY19. Interesting, the share of loss-makers was lower in Tier1 cities compared to Tier2 and Tier3 cities. In FY23, the proportion of loss-makers in Tier1 cities was at 66 per cent while respectively was at 68 per cent and 70 per cent in Tier2 and Tier3 cities.

These findings are turning prominent with the recent budget changes where both the taxes and costs were substantially increased. It’s common knowledge that traders are at a disadvantage to investors in generating substantial profits due to the uninterrupted compounding while simultaneously reducing the incidence of costs and taxes.

(The author is partner at “Wealocity Analytics”, a SEBI reg. RA (INH000017213) and could be reached at [email protected])