Investors' sentiment means the investors' attitude and opinion towards investing in the Stocks. So to say, there are several factors, which affect movements in stock market, but the most important among them is investors' sentiment. Sentiments are integral part of stock market that play an important role in every movement of the market.  

It is all about investors' psychology. If investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the other hand, if the market sentiment is bearish, most investors expect downward price movement.

The role of investor psychology in the equity market is inevitable. Essentially, investor sentiment is an approximate measurement of the stock market's attitude at a given time - it could be overly bullish, bearish, or could remain somewhere in the middle.

Investor sentiments or confidence can cause the market to go up or down, which can cause stock prices to rise or fall. Although, it is difficult to measure sentiments, we can point out the factors that drive sentiments in the stock market:  

• Investor participation in IPOs: It is often observed that retail investors limit their participation in the stock market if the sentiment is weak.   
• Investor participation in mutual funds: At times when the sentiment is weak, investor participation in mutual fund also goes down.
• Trading Volume: Weak sentiments also affect trading volumes in the market remarkably. When the sentiment is down, trading volume also falls.    
• Investor Surveys: Investor surveys done by newspapers and other media also indicate the sentiments in the market. The negative aspects of market performance get more pronounced in a falling market and this shows poor sentiments.

The other common factors that drive investors' attitude towards investing are rumors, intuition, herd mentality and investors & media version of stocks. To sum it up, whether measurable or not, investor sentiments play critical role in deciding performance of the market.

Disclaimer:

1. Views as are mentioned in the article are personal views of Author and nothing to link with Co., its Director and Employees.

2. All investments are subject to market risk and you need to consult your financial advisor/consultant before investment. 

Author: A Financial Content Editor at Sushil Group of Companies, Divya Nair is willing to learn new financial terminologies and trends around the world. She is a financial enthusiast and seeks to share everyday happenings in the financial markets and write on new topics For Example Mutual Fund, Equity, Stock Market, etc.