Application of Multi-criteria Decision Analysis for Investment Strategies in the Indian Equity Market

Investment Management and Financial Innovations

13 Pages Posted: 12 Aug 2021

See all articles by Sudipa Majumdar

Sudipa Majumdar

Symbiosis School of Economics; Middlesex University Dubai

Rashita Puthiya

Independent

Nandan Bendarkar

MBK Auditing

Date Written: August 2021

Abstract

In the Indian equity market, the Systematic Investment Plan (SIP) is the most popular strategy due to its convenience for disciplined investing regardless of market conditions. This study analyzes the excess returns of an extensive dataset of listed Indian companies from 2010 to 2019, along with a value-based version of the Multi-Criteria Decision Analysis (MCDA), to identify top performing stocks, based on their sectors and market capitalization. The findings of the study provide empirical evidence of Value Averaging (VA) as a viable alternative strategy over SIP (also known as Dollar Cost Averaging or Rupee Cost Averaging) as 352 out of 359 companies yielded higher returns under VA. The superiority of the VA strategy over the SIP was particularly marked in the consumer goods, financial services and industrial manufacturing sectors, with a clear dominance of small cap companies. The results also show that risk factors for VA strategy play an important role and should be taken into account, rather than base investment decisions on excess returns alone. The efficiency scores of individual stocks provide important insights for mutual funds, financial brokers and individual investors in India.

Keywords: investment strategy, systematic investment plan, value averaging, National Stock Exchange, value based DEA

JEL Classification: G11, C67

Suggested Citation

Majumdar, Sudipa and Puthiya, Rashita and Bendarkar, Nandan, Application of Multi-criteria Decision Analysis for Investment Strategies in the Indian Equity Market (August 2021). Investment Management and Financial Innovations, Available at SSRN: https://ssrn.com/abstract=3902416

Sudipa Majumdar (Contact Author)

Symbiosis School of Economics ( email )

India

Middlesex University Dubai ( email )

Knowledge Village, Block 16
PO BOX 500697
Dubai
United Arab Emirates

Rashita Puthiya

Independent

Nandan Bendarkar

MBK Auditing ( email )

Sheikh Zayed Road
Dubai
United Arab Emirates

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