BIASES IN INVESTING (A STUDY IN THE CONTEXT OF THE INDIAN STOCK MARKET)
Divija Bharadia
Student, Bombay International School , Mumbai, Maharashtra
Abstract
This paper will explore the profound influence of behavioral biases in making investment choices especially within the vibrant yet turbulent Indian stock market. Based on the concept of behavioural finance, it examines some of the main biases like anchoring, overconfidence, herding, loss aversion, confirmation bias, and others, illustrating how the psychological bias results in a decision-making behaviour that is not rational and optimal. A literature review and an empirical investigation of a survey among Indian investors show that these biases are strongly correlated with investment behaviours, including an excessive trading spirit or excessive conservatism. In my view, these biases cannot be mere anomalies but systemic issues based on the peculiarities of Indian culture, society, and economy, such as intensified digitalization and flooding of retail investors. Their practical implications can be observed based on the events of the 2020 COVID-19 market crash, the 2021 IPO boom, the 2023 Adani stock scandal and the 2024 mid-cap rally. Recent studies, such as those examining overreaction in NSE 500 stocks and the role of financial literacy in mediating biases, further underscore their persistence in 2025. This paper promises mitigation measures and focuses on education and technology, and concludes that it is important to work on reducing biases to achieve sustainable wealth creation in India. Finally, while economic growth fuels investment opportunities, at the same time, uncontrolled consumer prejudice may jeopardize the opportunities, exposing the necessity for sequential priority on behavioural awareness.
Keywords: Behavioral Biases, Investment Decision-Making, Indian Stock Market, Overconfidence, Loss Aversion, Herding Behavior, Mitigation Strategies, Correlation Analysis.
Journal Name :
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EPRA International Journal of Economic and Business Review(JEBR)
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Published on : 2025-10-10
| Vol | : | 13 |
| Issue | : | 10 |
| Month | : | October |
| Year | : | 2025 |