A Review of Behavioral Biases and Their Impact on Portfolio Performance: An Insight from A Retail Investor in India’s Nifty 50 Segment

A new area of finance referred to as "behavioral finance" has emerged due to the irregularities and intricacy of the stock market. Financial ‎market inconsistencies arise when there is no fundamental theory or paradigm capable of explaining the patterns in the returns on investments on securities, either cross-sectional or time series. The field referred to as "behavioral finance" investigates how individuals' feelings ‎and thoughts influence their investment decisions.‎ This systematic review of literature seeks to investigate the influence of behavioral biases and their effects on portfolio performance, specifically in the case of retail investors within India's Nifty 50 space. Based on academic literature from databases like Scopus, Web of Science, ‎Google Scholar, JSTOR, and SSRN, this review aggregates evidence from research articles published between 2015-2023. Some of the key ‎behavioral biases that have been identified are overconfidence, loss aversion, herding, anchoring, and mental accounting. The examination ‎shows that these biases have a significant influence on investment decision-making, which generally leads to non-optimal diversification of ‎the portfolio, high trading frequency, and lower returns. Interestingly, overconfidence and herding were the most dominant among Indian ‎retail investors. The results highlight the importance of enhancing investor education and behavioral consciousness to counteract the adverse ‎consequences of such biases. This review supports the increasing body of literature on behavioral finance in emerging markets and offers a ‎basis for future empirical research focusing on the Indian equity market‎.