The Influence of Political Events and Stability on Retail Investors’ Confidence and Sentiment in India

This study examines the influence of political factors on investor behavior in the Indian context, with a specific focus on political events and political stability. The research explores how these variables affect investor sentiment and confidence, which are critical determinants of decision-making in financial markets. Primary data were collected from 100 respondents across public and private sector banks using a structured questionnaire. Statistical tools such as cross-tabulation and Pearson correlation were employed to analyze the relationships between political variables and investor responses. The results demonstrate a strong positive correlation between political events and investor sentiment (r = 0.769, p < 0.001), indicating that impactful events significantly shape investors’ perceptions and reactions. Similarly, political stability showed a strong positive correlation with investor confidence (r=0.754, p< 0.002), highlighting the importance of stable governance in building trust within financial systems. Cross-tabulation further revealed that high-impact events and strong political stability were associated with higher levels of agreement among investors regarding their influence. However, some respondents remained neutral or disagreed, reflecting differences in individual risk tolerance and perceptions. The findings align with earlier international studies, which emphasize the role of political environments in shaping market outcomes and investor psychology. The study concludes that political stability and events are crucial drivers of investor behavior in India. Stable governance reduces uncertainty and fosters confidence, while unpredictable political events increase risk perceptions. These results offer valuable implications for policymakers, investors, and researchers.