Abstract The Indian equity market in the 2025–2026 period has been significantly influenced by macroeconomic narratives, particularly the “capex-led growth” theme driven by government infrastructure spending and private sector investment revival. This narrative has been widely propagated through financial media, brokerage reports, and market commentary, influencing retail investor sentiment and fund allocation patterns. This study examines the extent to which such thematic narratives impact retail investor behavior, specifically focusing on flows into sectoral and thematic mutual funds in the Pune district. The research is grounded in Behavioral Finance, Narrative Economics, and Efficient Market Hypothesis. A mixed-method approach is adopted, combining fund flow analysis with survey data from 380 retail investors. The findings suggest that narrative-driven investing significantly influences fund allocation decisions, often leading to short-term momentum-based flows rather than fundamentals-driven investment. The study contributes to the emerging literature on narrative-driven financial markets and offers implications for investors, fund managers, and policymakers.
Ajit Sambhaji Thite (Tue,) studied this question.