The Covid-19 pandemic has significantly altered the investment landscape, with investors now prioritizing regular returns, tax benefits, and the degree of returns. This shift in investment behavior is the focus of a recent report, a collaborative effort between the PHD Research Bureau, PHD Chamber of Commerce and Industry, and Jagan Institute of Management Studies (JIIMS), Rohini. The report aimed to analyze the changing dynamics of investment decisions in the post-Covid era and compare them with pre-pandemic behaviors.
The findings of the report are based on an analysis of investment behaviors over a four-year period, two years before the pandemic (FY 2018-2020) and two years after the pandemic (FY 2021-23). The study considered six financial instruments - mutual funds, bonds, stocks, derivatives, gold, and real estate - to assess the changing preferences of investors. Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry, commented on the robust performance of India's capital market in the post-Covid years. He attributed this to a strong regulatory environment, high economic growth, and investor confidence in India's growth story.
In the pre-Covid era, the decision to diversify the portfolio was primarily guided by the degree of returns and the regularity of returns. However, in the post-Covid years, tax benefits have emerged as a significant factor influencing investment decisions, along with the degree and regularity of returns. In the case of mutual funds, the degree of returns, regularity of returns, and degree of risk were the main influencing factors pre-Covid. However, the post-Covid period saw a shift in preferences, with liquidity becoming a more significant factor, along with the degree and regularity of returns.
Bonds, on the other hand, were primarily preferred for their tax benefits pre-Covid. Post-pandemic, the preference to invest in bonds was influenced more by tax benefits, liquidity, and higher returns. This shift in preference is reminiscent of the 2008 financial crisis when investors also sought safe havens and tax benefits amidst economic uncertainty. When it came to stocks, their preference for investment was primarily driven by the degree of returns and liquidity. However, post-Covid, investors viewed stock investments as high-paying ones and did not seek any other advantage like tax benefits or liquidity from them.
Gold bonds or Sovereign Gold Bonds (SGBs) remained a consistent choice for investors in both pre and post-Covid times, with tax benefits and regularity of returns being the primary factors governing the decision to invest in them. In the realm of real estate, the ability to sell quickly was a major factor considered by investors in pre-Covid times. However, in the post-Covid era, tax benefits and regularity of returns have become important factors governing investment preferences.
The report provides a comprehensive analysis of the changing investment landscape in the wake of the Covid-19 pandemic. It highlights the shift in investor preferences and the factors influencing these changes. As the world continues to grapple with the economic repercussions of the pandemic, this report offers valuable insights into the evolving dynamics of the investment world.
