What affects stock investment decisions in India? Study finds 14 factors

With enhanced financial literacy and user-friendly mobile trading apps, stock market investing is no longer limited to big investors and is now being embraced by retail investors on a large scale. Investors continuously look for information and refer to several sources before making investment decisions, as it directly impacts their returns. Research has shown that individuals make investment decisions based on economic, behavioral, and demographic factors.

A recent study named ‘A Study of Investment Decisions in India: The KANO Way’, cited in the NSE Market Pulse, April 2025, published by the National Stock Exchange of India, found some attributes that affect investment decisions in the country.

The attributes were identified and classified into ‘Must-Be’, ‘Linear’ and ‘Delight’ based on the Kano model, which is a framework that categorises the features of a product based on the level of satisfaction they bring to the customers.

‘Must-Be’ are essential features that leave customers dissatisfied if absent. These features don’t increase satisfaction but prevent dissatisfaction. ‘Linear’ features make customers happier and directly impact their satisfaction.

‘Delight’ features are not expected by customers but increase satisfaction if present. The absence of these features doesn’t cause dissatisfaction, as customers weren’t expecting them in the first place.

The study found that the must-be, linear and delight attributes are sector-specific. The study is based on a survey conducted in 10 Indian states among 467 individual investors over a year.

“A survey consisting of 14 attributes used for gathering information before investing in stocks was conducted for companies in 10 sectors of the Bombay Stock Exchange. They were Automobile, Banking, IT, Pharmaceutical, FMCG, Oil and Gas, Energy, Manufacturing, Infrastructure, and Telecom of the Bombay Stock Exchange,” the report stated.

The respondents were asked to rate the importance of 14 information-gathering items and companies from 10 sectors on a 7-point Likert scale.

A Study of Investment Decisions in India: Key takeaways

• Past stock performance is a must-have in most sectors. This means that the history of performance greatly impacts investment decisions in India.

• The condition of financial statements is also a must-have for most sectors. This highlights that investors rely on trustworthy information.

• Rumours are a linear factor in almost every sector—it is impactful, even if not always reliable.

• Insider information is a delight factor, which means that it is an unexpected feature that significantly increases investor satisfaction by providing a unique advantage.

• Expected bonus shares and stock splits are a linear attribute in almost all sectors, depicting that investor satisfaction increases when these are provided.

• Stock liquidity is a major linear factor in most sectors, and a must-have in energy, as high marketability boosts investor confidence.

• Press coverage is also a valuable factor in most sectors as it encourages investors to buy a stock, especially when analysts provide positive inputs in media reports.

• Internet information and expert inputs are valuable factors in several sectors as they help investors in informed decision-making.

The report said the classification employed in this study will be helpful for companies to attract investors, for information providers to provide information specific to the various sectors as indicated in the study, and for individual investors to build their portfolios.

“However, the study was limited to only 30 companies listed on the Bombay Stock Exchange,” it concluded.