Examining Diverse Factors Influencing Stock Market Investments of the Investors in South India

Abstract

The stock market encourages the flow of capital from private sector investors to the economy's major sectors. This study investigates the diverse factors influencing stock market investments and the risk perceptions of retail investors, with a specific focus on individuals from South Kerala. The research aims to understand the interplay of demographic, psychological and contextual factors shaping investment decisions. Data collection involved a mixed-methods approach, utilizing structured questionnaires to capture demographic profiles, investment preferences, risk tolerance levels and perceptions of market volatility. Secondary data from financial reports, market trends and regulatory updates supplemented the analysis, providing a comprehensive contextual framework. The primary data were gathered through Google Forms, following a pilot study with 50 respondents to refine the questionnaire. Data collection occurred from September 2024 to March 2025, capturing cross-sectional responses. Statistical tools such as KMO and Bartlett’s tests ensured sampling adequacy and factor analysis suitability, with KMO yielding a value of 0.608 and Bartlett's test indicating significance. These findings validated the use of factor analysis, revealing that the cumulative variance explained by three main factor groups such as Psychological, Personality and Other Factors, accounts for 95.82% of total variability. Psychological Factors was the most influential group, accounting for 49.68% of the variance, followed by Personality Factors (22.93%) and Other Factors (23.21%). Structural Equation Modeling was able to uncover the intricate interconnections between these factors. The results underscore the significance of psychological attributes and environmental influences in influencing investment behavior. This study adds to the literature of behavioral finance by providing practical insights for policymakers, financial planners and investors, in order to develop an inclusive and efficient stock market environment.