RESEARCH PAPER

ON
IMPACT OF COVID ON INVESTMENT BEHAVIOUR OF
INDIVIDUAL INVESTORS OF STOCK MARKET
Under Prof. Ritu Sinha
By
Shriram Nair and Abhishek Gaikwad

Purpose Of Study :-
       Savings and investments play a major role in economic development of any country and
the primary objective of all government’s policy has been to promote savings and capital
formation in the economy which is a primary instrument of economic growth. Personal
Savings in India is attributed to growth in income of individuals and the rising rate of
inflation. Financial savings include investments in deposits with banks and non-banking
finance companies, investment in stocks, mutual funds (retail investors are now steadily
lining up to invest in equity-oriented schemes of mutual funds. THE HINDU, MARCH 8,
2015, Page 15), Debentures, Small Savings, Life Insurance, precious metals such as Gold,
Silver, Bullions as well as provident and pension funds. The rise and decline in net financial
savings persistently change on par with inflation, leading to a low real rate on bank deposits
and small saving funds. Risk appetite of investor coupled with an uncertain global
environment which has been adversely affecting the returns from the stock market, slower job
creation is prompting households to favor investment in gold, seen as a hedge against
inflation, and also bad market returns. Indian financial market is considered to be highly
impulsive, responsive and combative. The role and importance of individual investors and
their trading behavior in Indian financial market is also imperative. Expected utility theory
views, individual investment decision as a trade-off between immediate consumption and
deferred consumption. But individuals do not always prefer according to classical theory of
economics. Recent studies on individual investor behavior have shown that they do not act in
a rational manner, rather than several factors influence their investment decision. The purpose
of this study is to analyze the determinants of individual investor’s behavior in Indian
financial market

Design And Research Methodology :-

Research design is the plan and structure of investigation so conceived as to obtain answers
to research questions. The plan is the overall scheme or program of the research. According
to Cooper & Schinder, there are many definitions of research design but no one definition
impacts the full range of important aspects. The method used for data collection was based on
the exploratory nature of the research using descriptive survey design. This is a type of non-
experimental research design for collecting and analyzing data in order to describe the
problem in its current status. It was a case study. Descriptive surveys design was used in
preliminary and exploratory studies to allow researchers gather information, summaries,
present and interpret for the purpose of clarification. This method is appropriate due to its
capacity to establish how the decision-making framework and behavior of investors in reality
is consistent with the existing theories of finance.

Data Collection
Primary data
It is the first-hand information, which is being collected by the researcher, or assistant is
called primary data. In this study, the primary data was collected through structured
questionnaire. Questionnaire was employed to collect the primary data from 150 selected
sample respondents in organization. Primary data was collected using an exploratory survey
method where a standard questionnaire with both closed and open-ended questions was
administered to capture the important information about the population. The selected
individuals were given the questionnaire to fill the questionnaire incorporated two sections
with the first section enquiring respondent's background information, while the second part
consisted of the, market information, people awareness of stock market, COVID-19 impact
on stock market. A 5-point Likert scales, which are rating scales widely used for asking
respondents' opinions and attitudes was utilized to ask the individual investors to evaluate the
degrees of their agreement with the impacts of psychology factors on their investment
decision. The 5 points in the scale are respectively from 1 to 5: extremely disagree, somewhat
disagree, agree, highly agree, and extremely agree.
Data Analysis and Presentation
Data was analyzed using the statistical package for social sciences SPSS software
package and the content analysis used in summarizing the finding. The data was coded to
enable the responses to be grouped into various categories. Factor analysis was used to test
the reliability of the items in the multi-item scales. Descriptive statistics was used to
summaries the data. This included percentages and frequencies. Tables and graphs were used
to present the data.

Findings:-
The study makes to understand that the average level of investment behaviour was found
among the respondents and the investment behaviour was found to be better at the time of
investment than before investment and post investment. The study also observed that the
safety was the foremost preferred aspect among the fixed income segment and investment for
safety. Capital appreciation was foremost preferred aspect in long term investment and pride
and contingency savings. Additional income was the most preferred aspect in liquidity
investments. The factors namely gender and investment ratio in real estate does influence the
investment behaviour. The pre-investment behaviour found to be significantly influencing
factor of overall investment behaviour of the investors considered for the study. The factor
capital appreciation influences more on the long term and savings. Even though huge number
of investments is available towards savings accounts, insurance policies, gold and silver are
found to be the most preferred investments. In this electronic era no doubt that the electronic
media and internet plays a key role in providing reliable information to the investors. The
analysis also shows that education on investment is necessary to the investors in Coimbatore.
The demographic profile like gender, age, domicile, marital status, education, occupation,
family type and family size have significantly influenced the investment behaviour.
1)Gender

The below pie chart shows that numbers of Males and Females are Investing/Trading in
Stock Market. From the respondents 54.7% are of the Male, 44.0% are of the Female and
1.3% others. Major population is Male population is the survey conducted.

what is your gender?

Fre
enc
Vali Male 82
d Female 66
Others 2
Total 150

2)Age
Group

The Study revealed that from the Investors/Traders who Invest/Trade in stock market are
mainly age group of 22 to 30 years old which accounts 63% of the survey sample population.
Among them major are Male then Female. while 36% are of the sample are from age group
15 to 21 Years. The data reveled that high proportion of the investors are from the 22 to 30
years old, that define younger age group. This represents that younger generation more aware
about stock market as well as trading/investing in stock market.

which age group do you belong to?

Frequenc Percent Valid Cumulative
y Percent Percent
Vali 15- 36 24.0 24.0 24.0
d 21
 22- 95 63.3 63.3 87.3
30
30- 9 6.0 6.0 93.3
45
45- 6 4.0 4.0 97.3
60
60+ 4 2.7 2.7 100.0
Total 150 100.0 100.0

3)Monthly Income

We can say the sample population belongs to lower middle class as the monthly income lies
between 0-40k.

what is your monthly income?

Frequenc Percent Valid Cumulative
y Percent Percent
Vali 0-40k 104 69.3 69.3 69.3
d 40k-60k 23 15.3 15.3 84.7
60k-80k 8 5.3 5.3 90.0
80k-100k 7 4.7 4.7 94.7
100k & 8 5.3 5.3 100.0
Above
Total 150 100.0 100.0

4)Occupation

Most of them were students then the corporate employee and least were Government
Employee
what is your occupation?
Frequency Percent Valid Percent Cumulative
Percent

Valid Student 94 62.7 62.7 62.7

Business 16 10.7 10.7 73.3

Corporate Employee 29 19.3 19.3 92.7

Government Employee 2 1.3 1.3 94.0

Other 9 6.0 6.0 100.0

Total 150 100.0 100.0

Kurtosis

Statistics
From how How often Which sector do you think will
long have did you outperform the market post
you been buy/sell COVID?
investing in stock on
stock average
market? during this
pandemic?
N Valid 150 150 150
 Missing 0 0 0
Std. Deviation .877 1.106 1.366
Kurtosis .726 -1.254 -.669
Std. Error of Kurtosis .394 .394 .394

We have a question which asks from how long you have been investing in stock market? The
kurtosis value is 0.726 which indicates that this survey question has outliers (extreme values).

The question How often did you buy/sell stock on average during this pandemic? has kurtosis
value -1.254 which indicates that this survey question does not have outliers (extreme
values).

Also, the question Which sector do you think will outperform the market post COVID? Has
the kurtosis value -0.669 which indicates that this survey question does not have outliers
(extreme values).

Regression
(One dependent, one independent)

Model Summary
Mod R R Adjusted R Std. Error of
el Square Square the Estimate
1 .110a .012 .005 .837
a. Predictors: (Constant), From how long have you been
investing in stock market?

ANOVAb
Model Sum of df Mean F Sig.
Squares Square
1 Regressio 1.264 1 1.264 1.805 .181a
n
Residual 103.676 148 .701
Total 104.940 149
a. Predictors: (Constant), From how long have you been investing in stock
market?
b. Dependent Variable: which age group do you belong
to?

Coefficients
Model Unstandardized Standard t Sig.
Coefficients ized
Coefficie
nts

B Std. Error Beta

1 (Constant) 1.804 .148 12.183 .000
 From how long have .105 .078 .110 1.344 .181
you been investing in
stock market?

a. Dependent Variable: which age group do you belong to?

Dependency test
In liner regression we analyse the dependencies between variables (questions). Here we have
compared Age and how long have you been investing in stock market which gives the value
(Adjusted R Square = 0.005) which is less than 0.05 that means both the variables are
dependent on each other.

(One dependent more than one independent)

Model Summary
Mod R R Adjusted R Std. Error of
el Square Square the Estimate
a
1 .324 .105 .086 1.078
a. Predictors: (Constant), Decision of other people
buying and selling stock has impacted your investment
decisions during this COVID, how frequently do you
invest? From how long have you been investing in stock
market?

ANOVAb
Model Sum of df Mean F Sig.
Squares Square
1 Regressio 19.853 3 6.618 5.693 .001a
n
Residual 169.721 146 1.162
Total 189.573 149
a. Predictors: (Constant), Decision of other people buying and selling stock
has impacted your investment decisions during this COVID, how frequently
do you invest? From how long have you been investing in stock market?
b. Dependent Variable: what is your monthly income?

Coefficients
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) 1.003 .388 2.581 .011
From how long have .325 .101 .252 3.199 .002
you been investing in
stock market?
How frequently do you -.120 .074 -.128 -1.629 .105
invest?
 Decision of other .152 .077 .157 1.989 .049
people buying and
selling stock has
impacted your
investment decisions
during this COVID
a. Dependent Variable: what is your monthly income?

Here we interpret the same dependency test but with respect to more than one independent
variables. As From how long have you been investing in stock market? And Decision of other
people buying and selling stock has impacted your investment decisions during this COVID
are dependent on monthly income as values are 0.002 and 0.049 respectively. Whereas How
frequently do you invest? Is not dependent on monthly income because its value is more than
0.05 i.e., 0.105.

Objective wise Analysis

 To study the level of awareness of stock market of individual investor during this
pandemic (1 objective)

Major population is familiar with the investment matters, some are very familiar and
10% crowd is not familiar.
 Around 31% crowd invest in Stock which is highest and least in Real estate accounting
7.3%.

53% population started recently, that is less than 1 year. Very less percentage of people
are investing from last 10+ years.
 Self-Analysis is something major population always opt for. And least opt for News
channels.

More people were old to this investing process and stock market.
 Major population does transact that is buying/selling of stock quarterly around 35%.

 To study how COVID has influenced the financial behaviour of retail investors.
(2objective)
 62% population will continue trading even after the COVID. Whereas 17% will
not
continue trading.

Major crowd is willing to hold the stock for 1-3 months or 1-5 years, and only 15% will hold
for forever.
52% people’s trading style has not changed, where as 48% people’s trading style has been
changed.

Most people check there profile weekly (35%) only 18% of population check their profile
quarterly.
According to the observation’s population think pharma market will outperform post
COVID-19 that is 30%. And 4 % people thinks oil and gas will outperform after COVID-19.

54% observation says that they have generated positive response during COVID. And both
no profit no loss and no positive return responses are same that is 23%.

 To understand investing psychology of individual investor during this COVID

situation. (3objective)
35% responses say that somewhat decision of other people buying and selling stock has
impacted their investment decisions during this COVID. Whereas 11% people Extremely
agrees that their decision has been affected.

34% population says that they somewhat agree to the fact that they are satisfied with
their investment decision.
35% population says that they somewhat agree to the fact that they have considered the
information given by their friends/family as a reliable reference for their investment during
COVID

Practical Implications:-
TOP INVESTMENT RECOMMENDATIONS FOR POST COVID TIMES

-Identifying the Current Market Cycle

-Invest with some basis
- Dilution of Gain happens with Diversification
-Don't rely on Public Information
-Decrease Your Emotional variations
-Asymmetric Risk reward investments

Identifying Current Market Cycle

The market is driven by cycles—cycles of the stock market, cycles of business, cycles of the
economy, cycles of human psychology, and etc.
Throughout the course of history, investment markets are known to make the same
pendulum-like swings between euphoria and depression; celebrating positive developments
and obsessing over negatives; overpriced and underpriced.
If you can invest in a sector where current investor sentiment is extreme pessimism (but
there’s good fundamentals for the future), you will make a lot of money (granted you have
the discipline and resolve to buy and hold for 5–10+ years).
Catching a trend before investor sentiment inflects from pessimism to hopeful or even
euphoria can mean the difference between working in a cubicle and achieving early financial
freedom.
NEVER FORGET where we are in the market cycle so you can figure out the odds of where
the market is going to be on a macro level.

Invest With some basis

It’s important to know what you’re buying and why you’re buying it. Always jot this down in
your investment journal. Most people’s basis for buying something is, “Everybody’s buying
it, so I should, too.” That’s a thesis, but it’s a bad one because You have no idea what you’re
buying.
Your why for buying it is predicated on what other people are doing. Your exit strategy is
most likely… sell when everyone sells. And so, you are always reactive.
Again, you have to know the companies you’re buying and why you’re buying them, so you
know when to sell for when your thesis no longer holds.

Dilution of Gains with diversification

If you know what you’re doing, diversification will only dilute your gains.
If you know a sector or company better than anybody else, what makes a company thrive in
that sector, fundamentals and investor psychology in that sector, how to read financial
statements, then you shouldn’t be diversifying into 20 mediocre companies when you know
how to identify the top 3.
In fact, aside from knowing that diversification will only dilute your gains, there’s always
less risk in owning 3 great companies than owning 20 mediocre ones.
But again, this is only if you understand what you’re doing. If you don’t, you won’t have the
conviction to only invest in a few names anyway, which is why general investment books tell
you to diversify.

Relying on Public Information = You’re Most Likely Too Late

Once something is being reported in the news, the consensus will have already been built into
the price, meaning you are too late.
Instead of relying on public sources of information that everybody has access to, call to a
company’s management team, investors, and even suppliers.
Do whatever it takes to get rumors/gossip that can help you figure out the truth of whether a
stock is cheap to buy.

Decrease Your emotional variations

“Only when you combine sound intellect with emotional discipline do you get rational
behavior.”
-Warren Buffett
The market in the short-term is a voting machine (driven by emotions).
The market in the long-term is a weighing machine (driven by intrinsic value).

Asymmetric risk reward investments

Asymmetric investment opportunities have limited downside and unlimited potential upside.
The biggest myth that retail investors have about the market is that they need to take huge
risks to get huge returns.
But truth is, great investors rarely take huge risks. Rather, they take as little risk as possible to
get the biggest upside possible (asymmetry).
And that’s exactly how great investors construct their portfolios. They make asymmetric bets
so they can be wrong most of the time and still achieve great returns.

OTHER RECOMMENDATIONS

● Investors are recommended to take a little risk in their portfolio so as to maximize

their own returns since the markets have shown recovery now.
● It is a good time to invest now since the market will boost as soon as vaccine for
COVID 19 will be
available. Therefore, taking calculated risks should fetch them good returns.
● Portfolio managers/Fund managers are recommended to diversify the risks and
encourage risk averse investors to take on some risk in their portfolio. Also, newer
investment avenues can be explored which the investors are not aware of and can be
encouraged to include those in the portfolio.
● Shifting back to the pre pandemic risk-taking abilities is recommended as the COVID
19 pandemic has almost come to an end and the chances of such a pandemic
happening again in the life of the investor are almost nil.

Originality:-
Research Limitations:-
Although the sample size is relatively high (N = 150) and satisfy the requirements of
statistical methods; however, it is suggested to have a larger sample size in further research to
reflect more accurately the realistic situation of COVID-19 ON INVESTMENT
BEHAVIOUR OF INDIVIDUAL INVESTORS OF STOCK MARKET

Conclusion:-
This chapter highlights findings that have emerged as a result of the empirical work on the
study of behavioural influences on human behaviour in investment decision making. From
the study of the stock market anomalies, it is established that there were varying levels of
efficiency in the stock market. This was how; for the less liquid stocks in the stock exchange
the market usually reacted slowly to news affecting a particular stock. However, for a highly
liquid stock there was increased and quick reaction to news relating to that stock. This
implied that the less liquid stocks did not react efficiently to the information in the market.
Herd behaviour also came out as a major factor
Influencing human behaviour in the choice of their investment options. Individuals investors
would invest in a share since the public is investing in the same but ignore any fundamental
and technical analysis that is necessary while undertaking any form of investment. However,
much more research needs to be undertaken with regard to the behavioural factors that
influence individual investors in their choice of equity investment at the bourse.

In case of COVID-19, because it’s a global Pandemic, the economic activity stopped around
the world. That psychological affected on the people. The market goes down continually in
month of March, the number of buyers also increase in this period of time. Secondary data
shows that March, April, May – 2020 were highly volatile for the stock market because of
COVID19 fear. In this volatile market major decisions taken by Government of India,
Finance Ministry and Large Market Capitalizations Companies. The major it impacted on
Stock Market. Market was highly volatile in these times. COVID19 has impacted many
sectors of Business area if they either an Individual or Partnerships firm or LLPs or
Companies, etc. There are seven factors that affect the banking & financing sectors due to
COVID19 pandemic: Deposits, Interest, Economic Activities, NPA, Liquidity, Defaulters,
and Digital Transformation. Deposits that normally converted loans and investments, for this
period of time Banks can’t generate much of deposits because of lockdown situation. Due to
nationwide lockdown economic activity almost 70% were closed for to prevent Novel Corona
Virus Infection. This time the money in cash as well as in digital form would not be as
circulated as earlier. There also various sectors affected due to this type of situation. There
was huge loss to the Entertainment sector, especially to Cinema industry. Causes of
Lockdown, theatres are closed, shooting of Films and Daily sops are stopped, workers, actors
and technicians are in their home. The Covid-19 outbreak has severely impacted the revenue
generation of hospitals across the country; this is likely to continue till FY21. The out-patient
division (OPD) segment of the companies in India is operating at 20% of the earlier base case
expectations, majorly on account of the lockdown, coupled with the inhibitions of the general
public to avoid going to hospitals as a precautionary measure. Manufacturing in the country
won’t take off as soon as lockdown restrictions are lifted due to an acute shortage of workers
who have returned to their home states, industrialists said. The automobile, textile and
engineering industries, among others, depend primarily on outstation employees for working
their plants.

The main factors affecting the Aviation industry during the pandemic include the decrease in
tours and travels as a large number of overseas as well as domestic flights are getting
cancelled all across the globe to prevent the transmission of the corona virus. The
government also cancelling the visa of foreign people and locking down affected area which
is also one of the major reasons behind the slowing down of the aviation industry. The
rapidly evolving situation of COVID19, agricultural sectors also affected. The prices of
Market and farms are differing. That affects cause of shortage or slowdown of supply chain
for delivering these items. There are also question of farmer’s health and pressure during this
lockdown. Cause of nationwide lockdown there also slowdown in farmers workforce.
COVID19 impacted also psychology on the people’s money. People’s investing and trading
technique are changed. It changed to large cap funds to small cap funds and companies and
blue-chip companies. People will think more on their short-term earnings from the market
than long term goal. They will put money after checking companies’ fundamentals data for
long term and short-term period.