Book Title: Shaping the Future: Innovation, Sustainability, and Inclusive Growth in a Globalized Economy
Editors: Editors: Dr. Shanu Singh, and Dr. Yashmita Awasthi
Student Editor: Krishna Singh Rawat
ISBN: 978-93-7183-006-5
Chapter: 12
DOI: https://doi.org/10.59646/725/12
Authors: Shreya Garg, and Dr. Suparna Jain Thakur
Abstract
Behavioural biases help explain why market outcomes differ from economic theories, yet their influence on retail investors remains underexplored in the Indian context. Traditional finance theory assumes that investors act rationally, processing information objectively to maximise utility. However, due to the deviations, the field of behavioural finance emerged. W. Forbes (2009) defined Behavioural finance as a science regarding how psychology influences financial market. This view emphasizes that the individuals are affected by psychological factors such as behavioural biases in their decision-making, rather than being rational and wealth maximising. India’s retail investment market has grown rapidly in the recent times. Demat accounts in India grew from around 4 crore in FY2020 to over 15 crore by mid-2024, (Business Standard, 2024). This growth is largely attributed to the technological revolution which simplifies market access and investments. Understanding the psychological factors that influence Indian retail investor population is hence vital.