Application of Fuzzy Analytic Hierarchy Process to Assess Key Financial Indicators Influencing Indian Stock Market Investments

Abstract

 This research examines the principal financial factors affecting investment decision-making in the Indian stock market through the application of the Fuzzy Analytic Hierarchy Process (FAHP). Financial data were obtained from the top ten companies listed on the Bombay Stock Exchange (BSE), while expert evaluations were gathered from two senior specialists—an experienced investor and a finance professor—each possessing more than fifty years of professional expertise. The analysis focused on four key financial criteria: Return on Equity (ROE) (C1), Earnings Per Share (EPS) (C2), Price-to-Earnings (P/E) ratio (C3), and Debt-to-Equity (D/E) ratio (C4). The FAHP results indicate that Return on Equity (ROE) (C1) is the most influential criterion in investment decision-making. The findings further reveal that indicators related to profitability carry greater weight in investor preferences, while liquidity-related measures have comparatively limited impact. Overall, the study offers valuable insights for investors by underscoring the importance of prioritizing profitability and growth-oriented metrics over short-term solvency considerations when constructing investment portfolios.