Social Media, Artificial Intelligence, and Behavioural Finance: Effects on Indian Retail Investors

The proliferation of social media platforms and the rapid advancement of artificial intelligence (AI) tools have fundamentally disrupted traditional patterns of financial decision-making among retail investors in India. This paper investigates how these twin forces interact with well-established behavioural finance biases—herding, overconfidence, loss aversion, anchoring, and availability bias—to shape investment choices in one of the world's fastest-growing retail equity markets. Drawing on a synthesis of theoretical frameworks from behavioural finance, information systems research, and technology adoption literature, alongside an analysis of recent empirical evidence from the Indian market, this study argues that social media and AI do not merely amplify pre-existing cognitive biases but also introduce entirely new forms of irrational behaviour. The paper further examines the regulatory implications of this convergence and proposes a framework for investor education and policy intervention. Studies show that when used the right way, AI could help mitigate bias and increase decision quality, but that its unregulated use in social media channels on a large scale, only through natural market forces without suitable applied sociological oversight, presents systemic risks to both corporate performance and household financial sustainability.