Beyond Rationality: Behavioural Biases and Investment Decision Making in India

Abstract

Behavioural finance questions the idea that investment decisions are based purely on rational calculations of risk and return. International research has demonstrated that financial judgement can be affected by cognitive shortcuts, emotional responses and social influences, but these effects are not consistent across different groups of investors and market settings. This article synthesises 25 selected studies on behavioural tendencies and investment decision-making in India and interprets the findings in light of selected international evidence. The review follows a structured narrative and an integrative approach. The studies are reviewed for their context, behavioural focus, methodology and main contribution. The synthesis suggests that the Indian and international evidence on overconfidence, anchoring, representativeness and loss-related behaviour converge widely. The results are more mixed for herding, financial literacy and investment experience. The article argues that behavioural tendencies may be psychologically recurrent, but their expression and consequences depend on investor capability, experience, information conditions, market uncertainty and the investment environment and that it is not correct to treat these differences as contradictions. The review also identifies methodological limitations, notably the prevalence of cross-sectional surveys, self-reported measures and geographically concentrated samples. The article adds to the literature by bringing together dispersed Indian evidence and interpreting it through the lens of convergence, contextual variation, and qualification, thereby supporting a more context-sensitive understanding of behavioural investment decision-making.