Decoding Investor Sentiments in the Indian Stock Market: A Structural Equation Modelling Approach.

Background of the study: This research examines how psychological and social biases affect individual investors' investing decisions. Investor sentiment significantly influences financial markets, frequently causing stock prices to deviate from their intrinsic values. In rising economies such as India, where retail investors are significantly affected by psychological factors, comprehending these attitudes is crucial. Methods: This study analyses data from a comprehensive questionnaire that was conducted throughout the nation and included 552 retail investors. The investigation employed structural equation modelling (SEM) to identify the elements that influence the decision-making of individuals who invest in the Indian stock market. Findings: The research offers insight on the influence that investor attitude has on investment decision-making as well as the factors that precede it. The study demonstrates that investors make financial decisions based on sentiment. In addition to assessing the efficacy of the Indian financial market, this study sought to ascertain the rationality of investors' choices by exploring the factors that influence their decision-making process. Conclusion: The outcome of the study shows that information seeking, anchoring, herding, representativeness, and overconfidence all have a big impact on investors. Moreover, the study has proven investors' irrationality and stock market inefficiency. The findings may be employed to further examine the trading practices of international investors and encourage further study in the field of behavioural finance.