Pati, Patni Aur Taxmen: Sebi study on women's trading success has a hidden story

Older traders handle derivative trading with care while the younger ones--to use an exagerrated imagery--light that on fire and juggle.

Are women calm, collected super-traders compared to clumsy men grasping for unrealistic profits, as a recent study by the market regulator suggests? Or must we dig deeper?

Yes, according to market insiders who Moneycontrol spoke to. The reason for women's outperformance, they said, may have more to do with taxation benefits than gender.

The Securities and Exchange Boad of India (Sebi) recently published a survey highlighting that women intraday traders make lower proportion of losses as compared to men. But this data from another angle suggests a very different truth, according to market players that Moneycontrol spoke to.

They said that many men traders use demat accounts created in the names of their wives or mothers (who may be housewives) to save on taxes. Therefore, the trading prowess could really be of the man who is operating the woman's account, and not of the woman.

For example, a man's taxable income can be quite high because it includes both his job and trading income. By using the demat account of his wife or mother, who may not have a primary source of income, the overall taxable income is reduced, leading to lower tax liability. This strategy leverages the lower tax brackets applicable to individuals with lesser or no income.

Female traders had a lower proportion of loss-makers than male traders since FY19, according to the study. The proportion of female loss-making traders was 66 percent in FY23, while for male loss-making traders, this number was higher at 72 percent. Similarly, the proportion of women profit-traders was higher at 33 percent in FY23, compared to male profit traders at 28 percent.

To marry or not to?
The study also suggested that marrying may help earn better trading profits. It said that married traders not only experience a lower proportion of losses but also generate a higher proportion of profits. That, our market insiders said, have more to do with age and wisdom than tying the knot.

Older traders handle derivative trading with care while the younger ones--to use an exagerrated imagery--light that on fire and juggle.

Here are the details.

People typically get married by the age of 30. By this time, traders usually have accumulated significant experience, which results in fewer losses and higher profits compared to their younger, unmarried counterparts, said Nilesh Sharma, Executive Director and President at Samco Securities.

The same case is seen with young traders, who have lower proportion of losses as compared to older traders, he added.

As per the analysis, in FY23, 75 percent of single traders were loss-makers, while the number of married loss-making traders was lower at 67 percent. In terms of profit, married traders were ahead. In FY23, the proportion of married profit-makers was 33 percent, while single profit-makers stood at 27 percent.

Among individuals under 30 years old, 81 percent were loss-makers, while among those over 60, only 53 percent incurred losses in FY23. Meanwhile, 76 percent of traders in the 20-30 age group were loss-makers in FY23.

"Young traders make more proportion of losses because they have a higher exposure to derivatives," said Atul Parekh, chief executive officer at Bigul. He further said that for Bigul, 55 percent of their young clients trade in derivatives.

The proportion of loss-makers was lower in Tier 1 cities compared to Tier 2 and Tier 3 cities. In FY23, the proportion of loss-makers in Tier 1 cities was 66 percent, while it was 68 percent and 70 percent in Tier 2 and Tier 3 cities, respectively.

Nirav Karkera of Fisdom said that traders in city hotspots have an edge over the traders in Tier II and Tier III cities because they were always trading in capital markets. He further said that brokerages and other financial institutions are mostly based in Tier 1 cities, which facilitates ease for trading.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​