Why Zerodha's Nithin Kamath thinks extending F&O trading hours is not a good idea

Zerodha CEO and co-founder Nithin Kamath

Amid strong social media buzz that suggests National Stock Exchange (NSE) is planning to extend F&O trading hours, Zerodha CEO Nithin Kamath feels it might not be the best idea and retail investors, instead of gaining from the extension, may end up on the losing side.

In a series of tweets on February 20, Kamath expressed that although extended trading hours for F&O will maybe signal the maturity of Indian markets, tracking P&L for long hours is "stressful and can affect life outside trading. Also, active traders don't make money, primarily due to over-trading."

Extended trading hours for F&O will maybe signal the maturity of our markets. They also level the playing field for domestic traders against international traders and are also good for capital markets businesses in terms of revenues, but I'm conflicted. 1/3

— Nithin Kamath (@Nithin0dha) February 20, 2023

However, Kamath also mentioned that extended trading hours "will level the playing field for domestic traders against international traders and are also good for capital markets businesses in terms of revenues, but I'm conflicted."

The Bengaluru-based billionaire and co-founder of the online broking platform warned, "While it could boost revenues for the capital markets business in the short term, I'm unsure if retail investors will end up doing better. This could then potentially lead to lower participation and liquidity in the longer run, which will affect everyone."

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Kamath's comments come against the backdrop of a lot of rumours earlier this month suggesting that NSE is getting ready to extend market trading hours for both equity and derivative segments. However, nothing has been officially disclosed by either the Indian bourse or capital market regulator Securities and Exchange Board of India (SEBI).

Meanwhile, a recent study by SEBI revealed a staggering fact that nine out of 10 individual traders in the equity F&O segment incurred net losses during both the years, FY 2018-19 and FY 2021-22. SEBI stated that on average, loss makers registered net trading loss close to Rs 50,000 in FY 2021-22. The average absolute net loss of a loss maker was over 15 times the net profit made by a profit maker.

The study also mentioned that there has been a significant increase of over 500 percent in the number of individual traders in the equity F&O segment in FY 2021-22, as compared to FY 2018-19. Ninety-eight percent of individual traders in the equity F&O segment traded in options during FY 2021-22.