Abstract:
This paper explores the paradox of investment decision-making wherein the Indian investors are reluctant to invest even though the financial ratios are favourable. The traditional financial theory is a rational behaviour premised on profitability, liquidity and solvency indicators. The behavioural finance however proposes that psychological factors play an important role in investment decisions. The study examines the hypothesis both on whether consideration of financial ratios and confidence in the profitability ratios can decrease hesitation in investment, and whether psychological hesitation varies among the age and educational qualification groups. The study uses primary survey data of Indian investors. The findings indicate that financial ratio analysis does not have strong explanatory power to minimize the level of hesitation (R 2 = 0.066), and demographic variables like age and education do not play a major role in the investor psychology. These aspects are emphasized as the findings reveal that emotional biases, risk perception, and psychological discomfort are higher than the numerical financial evaluation. The analysis is a contribution to literature on behavioural finance as it combines finance indicators with psychological predictors in the context of the Indian investment.