Behavioral Traits of Successful Investors in the Indian Market

28 Mar 2025 , 05:12 PM

Investing in any of the equity markets requires a blend of knowledge, discipline, and behavioural attributes. While financial acumen is essential, it is not the only trait required, Behavioural traits significantly influence investment success as well.

1. Patience and Long-Term Vision

• Belief in Long-Term Investing Over Short-Term Gains: Wealth is best built over the long run by harnessing the power of compounding, often referred to as the “8th wonder of the world.” Seasoned investors leverage this principle to maximize their returns. This effect is evident in stocks like Bajaj Finance, Asian Paints and HDFC Bank. Since inception, Bajaj Finance has delivered an astounding 119,743% return, Asian Paints has surged by 24,798% over the past two decades, and HDFC Bank has grown by 26,519% since its inception. 

• Navigating Market Volatility: Successful investors remain composed during market fluctuations, steering clear of panic-driven selling. Market downturns should be viewed as opportunities rather than triggers for hasty exits. Over the past 26 years, the NIFTY 50 has ended in positive territory in 21 years, despite experiencing an average drawdown of 20%. An investor should be comfortable with the fact that corrections are unavoidable and is a due course for the market.

2. Emotional Discipline

Emotional discipline is a largely underappreciated trait amongst successful investors. Emotionally driven rash decisions have led to several investing mistakes. Lack of emotional discipline could come in the form of fear, greed, attachment or even over confidence. Such traits result in individuals straying away from their investment strategies.

A few traits and ways to mitigate them and practice emotional discipline are:

• Controlling Fear: During a market downturn, fear often drives investors to sell off their holdings prematurely. However, a successful investor who is confident and has justified their investment decision remains committed despite periods of uncertainty. For example, consider the market upheaval during the COVID-19 crisis. Investors who panicked and sold their holdings out of fear not only locked in losses or sold investments at lower levels but also missed out on the substantial recovery that followed.
  From February 1, 2020, NIFTY 50 plummeted by 35% in just about 51 days, prompting many investors to exit due to concerns over further declines. However, those who maintained their investments were ultimately rewarded, as the NIFTY 50 surged by 90% between February 1, 2020, and March 1, 2025.

 

• Managing Greed: Just as fear drives investors to sell prematurely, greed can lead to holding onto investments for too long or making poor investment choices. Many investors, driven by market optimism and euphoria, either invest in lower-quality stocks or refrain from booking profits even after their investments have reached target levels. Both scenarios can ultimately result in losses or missed opportunities. While investing and staying committed to the market is crucial, it is equally important to book profits when targets are met, ensuring disciplined wealth creation over the long run.
  A clear example of this can be seen in recent market trends. Following the post-COVID surge, markets have remained overheated and on an upward trajectory. Many retail investors poured money into the market, expecting continued high returns. However, as valuations became stretched and earnings growth slowed, market corrections followed. Over the past 6 months, the market has declined by 14.2%, with NIFTY 50 reporting a -1.5% return between February 1, 2024, and March 1, 2025. Investors who invested in overvalued or lower-quality stocks during the euphoria are now facing the consequences of their decisions.

 

• Avoiding Herd Mentality: Many investors tend to follow prevailing market trends rather than conducting their own research. This often leads to what is commonly known as “FOMO investing,” where individuals rush to invest in a stock or sector simply because it is the “talk of the town.” As more investors pile in, stock prices surge, often reaching unsustainable levels. Early and informed investors, who entered before the hype, take advantage of the rally by booking profits and exiting at the right time. Meanwhile, the majority of retail investors, who joined the trend late without a strong understanding of the investment, are often left holding overvalued stocks that eventually decline.

Hence based on the above points it is imperative for individuals to keep a strong and firm mind while investing and not get swept in by their emotions.

3. Thorough Research and Analysis:

• Understanding Fundamentals: While emotional discipline is essential, it is equally important to assess the financial strength and business model of a company before investing. Gaining a strong understanding of a company’s fundamentals provides valuable insights, enabling better investment decisions. Investing in fundamentally sound companies not only enhances potential returns but also helps limit downside risk in a portfolio. Well known and reputed investors are very

• Diversification Knowledge: Diversification is a vital strategy for risk management. As the saying goes, “Don’t put all your eggs in one basket.” By spreading investments across different sectors, market capitalizations, and asset types, investors in the Indian stock market can mitigate risks while optimizing long-term returns. For example, if an investor had concentrated their portfolio solely in the NIFTY Commodities Index from Jan 1, 2004, to Mar 3, 2025, they would have faced a maximum drawdown of 32% while achieving a maximum upside of 883%. In contrast, investing in the NIFTY 50, which provides exposure across multiple sectors, would have resulted in a lower maximum drawdown of 27% but a significantly higher upside of 1,271% over the same period. This highlights the benefits of a well-diversified portfolio.

4. Risk Management Skills

• Setting Stop-Loss Levels: As mentioned above it is of crucial importance to know when to book profits and also book loses. The most observed traits and most recognised bias across investors is the overconfidence bias. This occurs when individuals are either overly confident about their stock ideas and refuse to understand the negatives of the co. or are too emotionally vested. Both are detrimental for the investor. The best way to tackle such a bias is to have preconceived stop loss levels. This triggers a sell in the script the moment it falls to certain levels thereby capping the losses.

5. Adaptability and Continuous Learning

• Learning from Mistakes: Investing in the Indian stock market can be rewarding, but mistakes are common. Learning from these mistakes can help investors refine their strategies and improve long-term success. Mistakes are part of the investment journey, but learning from them helps investors build a stronger, more resilient portfolio. Eg: Vijay Kedia, one of India’s most renowned stock market investors, faced significant losses before achieving success. His journey is a classic example of perseverance, learning from mistakes, and developing a disciplined approach to investing. Vijay Kedia’s story highlights that losses are part of the learning process, but perseverance, knowledge, and a long-term vision are essential for success in the stock market.

6. Value Investing Mindset

• Looking Beyond Stock Prices: Value investing is a strategy where investors seek undervalued stocks trading below their intrinsic worth. This approach has been championed by legends like Benjamin Graham and Warren Buffett.

The recent corrections occurring in the Indian stock markets is well corelated with the markets trading at higher valuations accompanied with growth slowdown. Stocks that have valuation comfort have shown resilience during these harsh times while those that were trading at absurd levels have corrected significantly.

• Investing in Strong Management: Management prowess is a strong factor one must consider before investing in the companies. It is crucial to understand the management capabilities and ethos as this is what drives the growth of the co. Selecting companies with competent leadership and governance.

Conclusion

Successful investors in the Indian markets possess a strong behavioural foundation that helps them navigate uncertainties. By practicing patience, maintaining emotional discipline, conducting thorough research, and adapting to market conditions, they achieve sustainable financial growth. Developing these attributes is key to long-term investment success.

~Ujwal Shah,

Fund Manager- Equities