We find the determinants of investor sentiment based on stock market proxies in many empirical studies. However, until date no study undertakes investor sentiment antecedents developed from primary survey measures by constructing an investor sentiment index. We fill this research gap by first developing an investor sentiment index (ISI) for the Indian retail investors and then examining the macroeconomic and policy-specific factors� impact on the investors� sentiment. We construct the ISI by using the mean scores of eight statements as formulated based on popular direct investor sentiment surveys undertaken throughout the world. Then, we employ the multiple regression approach overall and for top and bottom 20% investors based on the responses of 576 respondents on twenty-four statements (proxying nine study hypotheses) collected in 2016. We also study the demographic classification based investors� sentiment to make our results more broad-based and robust. Our overall study results prove that on a broader perspective, current and future macroeconomic fundamentals of the Indian economy drive Indian retail investors to invest in the stock market. The phases of economic cycle, lower rate of inflation and/or interest rate, sound regulatory environment, monetary policy have significant positive impact on investors� sentiment. On the other hand, commodity prices and fiscal policy influence Indian retail investors negatively. It is also intriguing to find that the GDP/IIP growth numbers drive retail investors in clusters (i.e. top and bottom 20%) negatively, but overall for not all Indian investors have any significant influence. Our results will have implications for Indian investors, brokers/investment consultants, regulators and others associated with the stock markets in general. Keywords: Investors� sentiment; Macroeconomic fundamentals; Policy-specific factors; Drivers of investors� sentiment. Article classification: Research paper