Background: Behavioral finance has long pushed back against the clean, frictionless world of the Efficient Market Hypothesis, and for good reason. Real investors — particularly retail participants — do not trade on pure information. They trade on emotion, habit, and cognitive shortcuts that can systematically distort their decisions. Among the various biases identified in the literature, overconfidence stands out, not merely for its frequency but for how consistently it leads investors to trade too much, diversify too little, and ultimately earn less than they otherwise would. India’s equity markets, which have undergone a dramatic democratization over the past decade, offer a rare opportunity to study these dynamics at scale.

Objective: This paper sets out to investigate how overconfidence bias, anchoring, and loss aversion have shaped investment decision-making among retail investors participating in India’s NSE and BSE markets between 2016 and 2025.

Methodology: Rather than administering surveys or conducting experiments, this study takes a different route: it uses secondary data from SEBI Annual Reports, NSE/BSE market publications, RBI statistical handbooks, and NSDL/CDSL account data to trace behavioral patterns over time. The choice to work with existing regulatory and market data was deliberate — it allows us to look at actual behavior rather than what investors say they do, which tends to be a very different thing.

Results: The decade under study produced clear, consistent evidence of all three biases. Retail participation in derivatives markets surged well beyond any rational risk-adjusted justification, particularly after 2020. Trading concentrated around historical price anchors like IPO issue prices and 52-week extremes. And during sharp market corrections — most strikingly the COVID-19 crash of March 2020 — retail investors were net buyers even as institutional players fled, a pattern that speaks directly to loss aversion and the psychological impossibility of booking a loss.

Conclusion: Behavioral biases are not marginal quirks; they are structural features of how Indian retail investors engage with markets. The implications for policy, financial advice, and investor education are significant and deserve more attention than they currently receive.