Mind over market: Impact of investor sentiment on the Indian stock market

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Stock market returns significantly influence investor sentiment, showing a strong correlation.
The composite investor sentiment index explains over 39% of variations in market indices, indicating its relevance.
Analysis employed principal component analysis to construct an index reflecting sentiment from news articles.
Investor sentiment can help refine asset allocation strategies, potentially improving market timing.

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Research shows how investor sentiment affects market returns in India, suggesting a nuanced relationship.

Alarnkar et al. (2025) studied this question.

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