A Study on Investor Buying Behavior and Financial Literacy in Urban India

Investor behaviour and financial literacy are some of the most discussed topics in modern times. In the present technology-driven setting understanding the above concerns could lead to major economic boosts for individuals as well as countries. This study treads on to explore these topics by developing a unique financial index based upon research-backed literature suited for the respondents residing in the urban cities of India and understanding investor behaviour through a series of questions. The paper studies the financial index developed with respect to the various demographic variables of the respondents trying to establish relations between them. The study finds that 43% of the respondents are financially literate while almost 10% are financially illiterate. We observe the relationships between age, gender, residence types, occupation, educational background, investment sizes, income and financial literacy scores. The study also in pursuance of understanding investor behaviour employs factor analysis techniques to the data gathered and recognizes that the same could be classified into four broad categories namely Active Investors, Proactive Investors, Dependent Investors and Cautious Investors. The analysis of preferences of the modern-day Indian investors through statistical methods reveal fixed deposits to be the most preferred vehicle closely followed by life insurance policies and mutual funds. Equity and Gold gain similar scores and one can conclude that the predominantly risk-averse Indian investors have shifted from investing in traditional avenues such as gold and real estate to more technical investment vehicles requiring a greater understanding of the world of finance.