Young Traders Fund Lavish Lifestyles With High-Risk Bets, Warns Edelweiss Mutual Fund CEO Radhika Gupta

The accessibility of commission-free trading and mobile investing apps has democratised the stock market, especially for youngsters or Gen Zs. The recent changes have significantly lowered barriers to entry, allowing investors to explore various investments beyond traditional avenues. However, this has also increased the investors’ exposure to highly volatile instruments. Radhika Gupta, MD and CEO of Edelweiss Mutual Fund expressed her thoughts on the investing preferences of young people and the changing market scenario.

“I have seen people in their 20s saying they don’t need to work because they are busy doing F&O. Young women who say their lifestyle and handbags are funded by trading gains,” Radhika wrote on X.

The post was accompanied by a screenshot of the Economic Survey 2023–24, which Radhika said emphasises this trend in specific “very strong language”.

She claimed that since this type of liquidity is hazardous for individuals as well as the economy, it is finally time for action to be taken.

According to the survey, there has been a notable surge in the activity of retail investors in India’s capital markets. On the National Stock Exchange, there are now 9.2 crore unique tax IDs as of FY24, up from 2.7 crore in FY19.

Young investors make up a large portion of this spike, and many of them are beginning to trade derivatives, particularly on expiry days.

The Economic Survey states that as derivatives training has the potential for enormous rewards, it appeals to an individual’s natural desire to gamble.

It further highlights that while derivatives can potentially yield substantial profits, they come with significant risks.

The Survey also notes that retail investors using derivatives to participate in the capital markets may suffer losses that tend to be large in the event of a significant stock drop.

It also makes note of the possibility that significant losses might deter future market participation by retail investors, which would be bad for both the economy and them.

The comments section of Radhika Gupta’s post had a mixed reaction.

A user wrote, “Government is worried about derivatives but not worried about online gaming platforms which are nothing but casinos!!” The user continued, saying that people lose more money on those sites than they do on stock markets.

“When the rich and powerful suddenly start caring for the average Joe, I worry,” a reply read.

Finance Minister Nirmala Sitharaman proposed to hike the securities transaction tax (STT) in the futures and options (F&O) segment in Budget 2024. The government also announced a hike in long-term capital gains tax and short-term capital gains tax.

The hiked taxes are being seen as a measure to limit the investors’ interest in F&O trading.