Work done on capital structure mainly focuses on developed economies and only few studies have been conducted for developing economies, especially for India. The present study is the first one which explores the validity of equity market timing for the Indian market. The paper tried to overcome the limitations of previous studies by capturing the individual year effect and by categorizing the firms into three sectors of the economyprimary, secondary, and tertiary. The present study broke the myth about the capital structure decisions, in which it is believed that market timing plays a dominant role, while all other variables are not considered as important as market timing. The period of the study ranges from the year 1992-2011 and the findings revealed that Indian firms have started relying more on their internal firm level characteristics like profitability rather than on market timing for their capital structure decisions. The results were similar when the firms were classified into three sectors, even though the effect of equity market timing was more pronounced for secondary sector firms as compared to the primary and tertiary sector firms. Therefore, the decision-makers should focus on strengthening the firm level characteristics (like profitability) rather than relying solely on equity market timing.

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