A Study of Portfolio Investments and Investor Behaviour of Retail Investors in India

Abstract

The Indian capital market has witnessed unprecedented growth in retail investor participation over the past decade, fundamentally transforming the investment landscape. This study examines portfolio investment patterns and behavioral characteristics of retail investors in India, focusing on asset allocation decisions, risk preferences, and psychological factors influencing investment choices. Through a comprehensive survey of 385 retail investors across major Indian cities and analysis of their portfolio compositions, this research identifies key behavioral biases and investment tendencies that shape decision-making processes. The findings reveal that retail investors exhibit significant home bias, overconfidence, herding behavior, and recency bias in their investment decisions. Additionally, demographic factors including age, education, and income levels significantly influence portfolio diversification and risk-taking behavior. The study employed both quantitative and qualitative methods, utilizing structured questionnaires and secondary data from investment portfolios. Results indicate that most retail investors maintain inadequately diversified portfolios with heavy equity concentration, limited international exposure, and insufficient allocation to debt instruments. The research contributes to understanding the behavioral finance landscape in the Indian context and provides insights for financial advisors, policymakers, and retail investors themselves to make more informed investment decisions.