Animal spirits is a term coined by the influential British economist John Maynard Keynes in his landmark 1936 work 'The General Theory of Employment, Interest and Money' to describe the instinctive, emotional, and psychological forces — including confidence, optimism, fear, and herd behaviour — that drive human decision-making in the economy and financial markets, beyond purely rational calculation. Keynes argued that investment and consumption decisions are heavily influenced by the prevailing mood and confidence of businesses and consumers, not just objective data. In modern behavioural finance and macroeconomics, animal spirits capture the cyclical swings in business confidence, investor sentiment, and consumer spending that amplify economic booms and deepen recessions. For Indian equity investors and traders on Ventura Securities, understanding animal spirits helps explain market overreactions, momentum phenomena, bubble formation, and the divergence of asset prices from fundamental valuations during periods of extreme optimism or pessimism.
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