IPO flipping, risky trades & debt: The dangerous game young Indians are playing
The dream of becoming rich overnight is pushing a growing number of young Indians down a dangerous path—gambling on risky trades, taking high-interest loans, and ending up deep in debt.
Encouraged by social media finfluencers and emboldened by behavioural biases such as herd mentality, FOMO (fear of missing out), and overconfidence, these retail traders are chasing high-risk derivatives trading and initial public offering (IPO) flipping.
According to Securities and Exchange Board of India (Sebi), the number of intraday traders has surged fivefold, with nearly 48% of new entrants under the age of 30. A staggering 93% of the 1.13 crore traders between 2022 and 2024 ended up losing money—amounting to combined losses of ₹1.8 lakh crore. The average trader earned ₹5 lakh annually, but suffered average losses nearing ₹2 lakh.
Much of this frenzy has been around IPO flipping. Many young investors today subscribe to IPOs not for long-term growth, but to exit quickly with listing gains. Sebi data shows that 50% of IPO shares allotted to individuals were sold within a week of listing. Of the 80 IPOs listed between December 2024 and March 2025, 57 posted average listing gains of 40%, while only 14 listed at a loss—yet these bets often backfire for the uninformed.
This behaviour also reflects the disposition effect—where investors rush to sell IPOs with early gains while continuing to hold those that list at a loss, hoping to recover eventually.
Also read: Devina Mehra: Investors must see through gold's glitter as a risk-free investment
Notably, almost half the demat accounts active in IPOs during 2021–23 were opened after the Covid-19 pandemic, reflecting the new wave of first-time, digitally savvy investors—many of whom may lack adequate financial education.
Interestingly, the subscription levels in the non-institutional investor (NII) category halved from 38 times to just 17 times during this period, signalling waning interest from seasoned investors even as retail participation soared.
Where is the money coming from?
This pattern of speculative investing raises a pressing question: how are young investors, many on modest incomes, funding such risky behaviour?
Some market observers believe that personal loans—especially from non-banking financial companies (NBFCs)—are playing a major role. According to the Fintech Association for Consumer Empowerment (FACE), NBFCs sanctioned nearly 14 crore personal loans worth ₹9 lakh crore in FY24.
While banks offer personal loans at rates as low as 11%, NBFCs charge up to 45%. Why are investors turning to NBFCs?
The answer lies in accessibility. Many borrowers either lack a good credit score, don't meet strict banking criteria, or are deterred by the longer bank approval process. NBFCs, with faster and less stringent lending, have become the preferred option—particularly for borrowers under financial strain.
A ticking time bomb
This easy access to credit is creating a dangerous cycle: borrow to invest, lose money, borrow again to recover. Without a solid repayment strategy, many young traders fall into a spiralling debt trap.
The Reserve Bank of India's Financial Stability Report (FSR) confirms these concerns. While India's banking sector non-performing assets (NPAs) dropped to a 12-year low of 3.12% in September 2024, NBFCs continue to face higher NPA levels due to their exposure to unsecured personal loans.
The report also flags the double-digit growth in unsecured lending by NBFCs as a risk, citing concerns over risk management and credit quality in the face of rising retail leverage.
Also read: Can multi-asset funds balance risk and returns?
What needs to change
There's an urgent need to tighten NBFC regulations, particularly around unsecured lending. Loan approvals must be linked to risk profiles and end-use cases. A better understanding of where these loans are being deployed—especially if funneled into trading—can guide effective policy responses.
At the same time, improving financial literacy and raising awareness about behavioural finance traps is critical. Encouraging responsible investing, rather than speculative trading, can help safeguard both personal finances and the broader financial system.
Unfortunately, this borrowing behaviour creates a vicious cycle, leading to a debt trap as many loans are taken at extremely high interest rates. Young traders can face a downward spiral of mounting debt without a proper repayment plan.
Also read: BluSmart lessons: Investors must look beyond high-growth stories
Abhishek Dadhwal is a PGP student at IIM Raipur, Rasmeet Kohli is a senior AGM at NISM, and Pradiptarathi Panda is an assistant professor at IIM Raipur.
The views expressed are those of the authors and do not necessarily reflect the views of their institutions.
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