Self-efficacy is a very important construct discovered and developed by the sociologist Albert Bandura. High levels of self-efficacy help a person to confidently perform and achieve his goals. The positive moderating influence of self-efficacy has been studied in many contexts. The self-efficacy levels of a person are influenced by various factors like performance accomplishment, vicarious experience, verbal persuasion and physiological states. In this study, we have explored the relationship between self-efficacy, perceived stress and happiness among the students of Amrita School of Engineering, Coimbatore, which is known for a very high level of academic rigour in the programme. This rigour causes stress among the students. We wanted to see if higher level of self-efficacy helps to reduce the perceived stress thus enhancing the happiness level among the students. The data was collected using a survey instrument with the scales to measure self-efficacy, perceived stress and happiness borrowed from the literature. The sample size was 152. The results showed moderate to strong support for the conceptualized hypotheses. A moderate but inverse relationship was found between self-efficacy and perceived stress, as well as perceived stress and happiness. The relationship between self-efficacy and happiness was found to be quite strong and significant.