Case: A Case Study on Investor's Emotional Decision Making Trapped and Hauled to Scam in The Indian Stock Market (IIMR-C26-08/2024)

Abstract

This case study dives into Mr. Sharma's emotional investing selections over his ten-year tenure as a retail or individual investor in the Indian stock exchange. He has recently made emotional financial decisions, falling prey to a stock market swindle. Mr. Sharma, a seasoned retail investor on the Indian securities exchange, has encountered a distressing turn of events in his investment journey. Over the past decade, he has navigated through market ups and downs, gaining valuable experience along the way. However, recent developments have highlighted a concerning trend in his decision-making process: emotional investment decisions. Mr. Sharma's once methodical approach to investing has been overshadowed by emotional impulses, leading him down a precarious path. His vulnerability to emotional sway has made him susceptible to a stock market scam, resulting in significant financial losses and emotional distress. The Indian stock market, like many others, is susceptible to unscrupulous tactics that prey on naive investors. Pump-and-dump schemes, insider trading, and bogus IPOs are just a few of the many frauds that plague the market. These techniques influence stock prices, take advantage of information gaps, and trick investors into making poor judgments. The temptation of rapid gains and the fear of missing out (FOMO) compromised Mr. Sharma's judgment, leading to his involvement in a pump-and-dump operation. Manipulative tactics artificially inflated stock prices, enticing Mr. Sharma and others to invest without due diligence. Unfortunately, the bubble burst, leaving investors like Mr. Sharma grappling with substantial financial losses and shattered confidence. This case study underscores the intricate interplay between emotions and investment decisions, shedding light on the psychological underpinnings that influence financial behavior. Mr. Sharma's experience fills in as a useful example, stressing the significance of keeping a judicious and trained way to deal with financial planning. Mr. Sharma's situation involves fundamental concepts like portfolio selection, asset pricing, and market efficiency from the perspective of financial economics. His emotional vulnerability underscores the challenges investors face in navigating an inherently uncertain and volatile market environment. Moreover, the prevalence of stock market scams in India underscores broader issues related to financial institutions and services. Regulatory oversight, transparency, and investor education play pivotal roles in safeguarding investor interests and maintaining market integrity. Moving forward, Mr. Sharma's journey serves as a poignant reminder of the need for continuous learning, resilience, and emotional intelligence in the realm of investing. By cultivating a balanced mindset and exercising prudent judgment, investors can mitigate risks and enhance their long-term financial well-being.