Exploring the Relationship Between Retail Investor Knowledge and Equity Investment Preferences in Indian stock market

The equity market offers significant opportunities for wealth creation but demands informed decision-making due to its inherent risks. This study examined the relationship between retail investors stock market knowledge and preference for investing in equity shares, with specific reference to Dhanbad City. The data were collected from 248 active investors who responded to the structured questionnaire which examined five dimensions of knowledge (i.e., general understanding of the market, ability to interpret financial statements, ability to predict market directions, ability to select stocks, and ability to know when to enter and exit the market). The results indicated a moderately strong positive association between stock market knowledge and equity investment preference (R = 0.628, R² = 0.392). Four knowledge areas market basics, financial statement analysis, market trend prediction, and stock prediction were significant in affecting investor preference while entry/exit timing had no significant effect. Analysis also found that investor demographic differences were found to be significantly more participating at the male, middle aged, and participants with more education and income levels, and environmentally with digital trading platforms as the best choice for decision-making sources. These results suggest that targeted investor education could provide a significant impact on levels of equity participation. By continuing to develop their analytical and interpretative skills and through awareness and exposure, policymakers, regulators, and market educators can foster more knowledgeable and confident retail investors in developing urban centres like Dhanbad, which would lead to enhanced financial inclusion and capital market development.