Digital Financial Literacy and Investment Decision Quality among Retail Investors in India Evidence from Pearson Correlation and Hierarchical Multiple Regression

Abstract

The rapid proliferation of digital financial platforms, robo-advisory services, and mobile-based investment applications has fundamentally transformed the retail investment landscape in India. Despite this democratisation of market access, concerns persist about whether retail investors possess the cognitive and behavioural competencies necessary to translate digital access into sound investment decisions. This study investigates the influence of five key determinants, namely Digital Financial Literacy, Risk Perception, Investor Confidence, Access to Digital Platforms, and Financial Planning Behaviour, on Investment Decision Quality among retail investors in India. Primary data were collected through a structured questionnaire administered to 340 retail investors drawn from five major Indian cities using stratified random sampling. The data were analysed exclusively through Pearson correlation analysis and hierarchical multiple regression. Correlation results confirm that all five determinants share statistically significant positive associations with Investment Decision Quality, with correlations ranging from r = 0.572 to r = 0.648. The hierarchical regression model, controlling for investor age group and annual income, explains 68.1% of variance in Investment Decision Quality (R-squared = 0.681, Adjusted R-squared = 0.672, F = 114.29, p less than 0.001), with the five determinants alone contributing 58.7% incremental variance above and beyond the controls. Financial Planning Behaviour (Beta = 0.221) and Digital Financial Literacy (Beta = 0.231) emerge as the two strongest predictors. The findings carry significant implications for financial regulators, investment platform designers, and investor education programme architects seeking to improve the quality of retail investment participation in India.