Behaviour beats algorithms, says Bajaj Finserv AMC’s Nimesh | Stock Market News

When Nobel Prize-winning physicists stumble in the stock market and legendary investors outsmart mathematical models, this tells you investing is more than just understanding numbers.

At the Mint India Investment Summit & Awards 2025, Nimesh Chandan, chief investment officer of Bajaj Finserv Asset Management Ltd, unveiled the hidden battlefield where human psychology wages war against rational investment strategies.

He pulled back the curtain on why even the most brilliant minds can become prisoners of their own emotional traps.

Drawing from the missteps of celebrated economists and the wisdom of investment legends, Chandan noted the behavioural finance that promised to change how investors think about money, markets, and the most unpredictable variable of all: human nature.

Chandan dismantled the myth of purely rational financial markets. Chandan highlighted the work of pioneers like Harry Markowitz and Irving Fisher and illustrated how even brilliant minds struggle with market emotions.

He emphasized that investors’ greatest challenge is often themselves, echoing Benjamin Graham’s famous insight that the “chief enemy of the investor is likely to be himself”.

Chandan highlighted some of the key behavioural biases that impact investment decisions, showcasing tools like the investment checklist, pre-mortem analysis, and investment journaling as methods to counteract emotional trading.

Chandan stressed that understanding market psychology—beyond simple greed and fear—is crucial for creating investment alpha.

Referencing historical market cycles from the Dutch tulip bubble to the 2008 financial crisis, Chandan underscored a fundamental truth: While markets and securities change, human nature remains constant. “If you see the history of finance and investing, you go back 400 years. Events are different and distinct, but the patterns are common.”

“Countries change, institutions change, but human nature doesn’t change, and that was what causes the boom, bust cycle in the market,” he added.

His message was clear: successful investing requires not just financial acumen but a deep understanding of human behavioural patterns. “It is very important to have a behavioural edge, if you want to create alpha or outperform the crowd.”

He argued that unlike physics, which deals with non-emotional elements, economics involves human beings with complex psychological responses that cannot be reduced to simple equations.

Chandan emphasized that understanding these biases is crucial for creating investment alpha and outperforming market expectations.

Chandan introduced several practical tools for managing behavioural biases. The investment checklist acts as a “cognitive net” to evaluate investments objectively. The pre-mortem technique involves imagining potential failure scenarios to understand risks better. An investment journal helps distinguish between luck and skill, while simulations and stress tests provide insights into potential portfolio performance.

He highlighted the importance of de-biasing techniques, advocating for “nudging” rather than “pushing” behavioural change. “Nudge is better than push. Push increases stress in the system. Nudge actually gets the same result by de-stressing the system.”

He suggested strategies like pre-commitments, where investors establish exit criteria before entering an investment, helping to overcome emotional attachment and endowment bias.

Chandan concluded by stressing that the most successful investors are those who can control their own biases and understand market psychology. The ability to recognize emotional patterns, resist herd mentality, and make rational decisions under uncertainty separates exceptional investors from the average market participant.