Vijay Kedia explains why F&O trading for new investors needs more regulation, education

Kedia believes that while the NSE, BSE and SEBI are doing their share to educate investors, a lot more can be done

Tejibazaar mein sab shaane hote hain (Everyone is a genius in the bull market) -- This is what ace investor Vijay Kedia said in a conversation with Moneycontrol while talking about the growing number of new investors.

With the growing number of investors in the F&O space, some level education and regulation is needed, or else it risks becoming a gambling pit for those looking to make easy money, said Kedia.

“Ninety percent of the people doing this think this is an online game. There is no intelligence, no understanding, no one has the means to play the future option,” Vijay Kedia said, even calling for a ban on futures and options trading for new investors.

Also watch: Dream run for small & mid caps: How can you find them in this market? | Ace Investor Vijay Kedia

“This should be taken into account, this is high time, and it should be banned, otherwise the end result is bad,” the market veteran said, comparing it to a casino or playing poker on mobile.

Earlier this month, market regulator SEBI asked broking platforms to display a warning on the F&O section that about 90 percent of traders lose money in the futures & options segment. Post-covid, the number of retail investors have grown in India -- not only in SIPs but also direct equities and even within the Futures and Options (F&O) space. As of May 2023, the total number of Demat accounts on the NSE have grown from 40.9 million in March 2020 to  123.5 million in July 2023, the number of F&O contracts has also grown from around 3 million in January 2020 to around 8 billion in August 2023.

ALSO READ: SEBI proposes to overhaul eligibility criteria for inclusion in F&O segment

Kedia added that earning money through short-term strategies such as those that work only when the market goes up are scary and one needs to have a strategy that works in all markets. “If something works once it is not a strategy, it is a chance,” he said.

“Four-five years ago I had tweeted a statement saying that the SEBI (Securities and Exchange Board of India) should ban new investors. Like you have an age when you can’t drink, you have to have a permit; similarly, you need a licence to drive a car,” he says.

Kedia conceded that maybe SEBI can't take drastic action. “Like in the case of cigarettes or alcohol, while it is sold but you also say that it should not be consumed, in democracy that is the kind of formula that exists. So the only way ahead is to educate them on how to do things -- you have to walk left, stop the car on the signal, if there is an ambulance, you have to go left, so they will let you go. Like we use these things in life, we use it in the market,” he added.

Kedia believes that while the NSE, BSE and SEBI are doing their share to educate investors, a lot more can be done.

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