Assignment-1

Research Proposal

Forms: Written and Presentation has to be made

Each Group: 30 Min (20 Min Presentataion-10 Min Q&A)

Phase-1

Note:

1. Assignment has to be submitted By Sep 02, 2021

2. Presentation has to be made by the respective groups. 30 Minutes each
(CR will give me the schedule Sep 2, 2021)
3. Submit the synopsis in the following format
a. Heading F:24, Bold,
b. Body Heading: F:14 B
c. Body: F 12 Times New Roman

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Page-1
Title of the Project

INCREASE IN INVESTORS POST

COVID

Submitted By: Abhinav Jain (76012000209

Siddhi Jain (76012000211)
Gaurav Agarwal (76012000278)

Submitted To:
Prof Shashank Mehra
Associate Professor

Date of Submission: 2nd September 2021

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 SOE – SCHOOL OF ECONOMICS

Content

S No Description Page No’s

1. Introduction
1.1 Significance of the research/Rationale of the study

The economy of any country is determined by both the sectors: Private and Public. The
development of these two sectors is very much depended on the people of the country
because they are the ones which provide financial support to the government as well as
the companies. They do that by either becoming the shareholders in the company i.e., by
becoming the owners or they might become the lenders. When we talk about the
shareholders, they are a part of the company and face the profits and loss no matter what.
So, the recent growth in the number of investors in the market is very important for us to
study to know the idea and thinking behind this growth. Because this will eventually
result in development of the industries and the country.
Other significance of this research is to figure out where people like to invest and
how they like first invest. What is the risk they are willing to take and what reward they
get in return? The other thing is, in this global pandemic where there is loss of jobs,
insufficient funds and not a lot of surpluses with the people, how has investments
increased?

1. Consumers/ Investors:
Before investing the hard-earned money, anyone would want to know what they
might be getting into. Which sector is growing and providing profits in return?
How long it can take for their investments to provide them with a cushion? These
questions can get answered here. Plus, the new investors in the market after
knowing about the money matter and what they can get in return might get
motivated to invest their surplus.
2. Companies/ The industry:
The companies will be benefited by knowing the where people are putting their
money into and where they are not. They will be able to more their resources as
required. A detailed analysis will help them figure out if the investments are short
term or long term. What R&D they can bring to attract more funding and
encourage people to invest more?
The companies are obviously already in a better position because the market
boomed why would anyone not want to expand and excel during this period.

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 1.2 Background of the study

Amidst the fears of the Covid19 pandemic and the global recession Sensex plunged a
whopping 2713.41 points which was around 8% in a particular day on March 16, 2020.
During the month of March Sensex crashed over 1000 points more than 10 times and
then on 23rd March 2020 it recorded 13.2% fall which was highest in about 30 years and
all the shares locked in their lower circuit and even Nifty declined over 29% during this
period. But after that in April people starting buying the stocks and started injecting funds
in the market which was a major boost for it and their major focus was Pharma sector and
the FMCG sector as they were sure that pharma will strengthen during this pandemic
period and FMCG because they include the essentials a person needs in his/her day-to-
day life.

1.3 Major development in the industry-With Data Figures and

Graphs

Here we see that Nifty Pharma showed the most growth since the crash and Nifty FMCG
&BSE Oil &Gas has shown the growth almost on the same lines. The global
pharmaceutical manufacturing market size was valued at USD 405.52 billion in 2020 but
since the pandemic, it has reached tremendous heights because of the increase in sales
and revenue generated during this period as the past year Demand was at its peak. There
were major developments here like use of new technology which was cost efficient and
fast, AI was used which helped in the research and growth of companies

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Here as we can see the sell offs or the net outflows of foreign investors totaled 1.5$ billion
in April 2020 against 8.4$ billion during the peak crash in March 2020.Those sellers who
did panic selling turned out and became the buyers of the Indian Equities after 4 week of
massive selloffs.

Here we see that the Indian stock exchanges Index Sensex and Nifty50 were in similar lines of
growth and fall from March 2020 till date percentage wise with NASDAQ and Dow Jones
Industrial Average.

1.4 Reasons for the growth of the industry

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India’s NSE Nifty 50 index has more than doubled itself since the low of march 2020
post the announcement of nation-wide lockdown. It is touching new peaks every month
and is among the best performing indices in the world.
The major factors for this high interest in equity market is low interest rates and ample
liquidity and any reversal in these policies will affect the market. Interest rates have been
maintained at a record low by the RBI since May last year. The RBI has also injected
extraordinary liquidity in the banking system.
Several central banks of the world have either hiked or indicated a rise in interest rates,
but RBI have maintained a dovish stance on this situation. Foreign investors have noticed
this and the net inflows have amounted to $7 billion in 2021 so far, which is highest
among the emerging markets in Asia.

1.5 Key challenges/Research agenda/Explore, describe and find out

the relationship

The various variables we have included in the research are: Incomer of an Individual
which is the independent variable.
The dependent variables are: index, stocks, investment amt(capital) and savings, as
savings is dependent on what an individual earns and then the part he saves, he invests in
the stocks in the form of capital, more buying of a stock leads to increase in its prices
which further leads to the rise in points of the index in which it is in be it whether Nifty
50, Sensex or Nifty Metal or S&P BSE Bankex.
Till now the relationship of stocks and investors was shown but, in this paper, we will
cover the sentiments of investors after calculating what the returns will be after reducing
the taxes which will be levied on both long term and short term investments.

2. Literature Review
2.1 Major works

A Study on the Impact of COVID- 19 on Investor Behavior of

Individuals in a Small Town in India

The Significant research attention has always been paid to the effects of the
COVID-19 pandemic on gold prices, crude oil prices, cryptocurrencies and market
indices. However, the influence of the COVID-19 on individual investor behavior is an
area that remains relatively under-examined. This research paper focuses mainly on that.

Factors Influencing Individual Investor Behaviour

Cognitive characteristics play a significant role in individual decision making related to

investing. Psychological attributes such as the capability to take risk, mental calculation,
willingness to take financial risk and degree of risk aversion significantly affect
individual investment decisions. A Study on Impact of COVID- 19 on Investor
Behaviour of individuals says that investors sought security of assets convertibility into
cash, and growth in the amount of investment (appreciation) in order of priority.

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The change in investor perception drives the willingness to trade and take risks. This is
mainly due to the poor performance of the stock market during the financial crisis. Other
variables impacting investor behaviour include ability of investors to buy
shares; tax implications; dividend expectations; risks involved; and capital gains.

While undesirable events may not be necessarily prevented, risk may be reduced by
investing in different, relatively secure investments with fair returns.
The individual investor behavior was impacted by the measures taken during the COVID-
19 outbreak. The monthly amount invested by respondents in SIPs (Systematic
Investment Plan) dropped by 43%. The major reasons behind the decreased investment
were decline in household income and retaining cash for emergencies.
Other reasons cited by the people certainly included fall in the stock market (Nifty 50 and
Sensex experienced a fall of 38%-40%); mutual funds also yielded negative returns
during the pandemic.
The preference of the form of investments of the people had changed. Their investment
and portfolio management perceptions also changed. Presently, they preferred
investing in instruments that offered moderate returns and were less risky, such as bank
deposits (savings account and fixed deposits), gold, mutual funds, and postal savings.
Studies suggest that bank deposits, PPF, gold, chit funds, NSC, etc. attract investors in
search of low-risk investment options.
Change in preference for investment options before and during COVID- 19
There was a 30% decline in preference for mutual funds during the pandemic. The
decline was sharper for the stock market at 53%. On the contrary, it was observed that the
people were willing to diversify their portfolio towards less risky investment options such
as bank deposits, postal savings, and public provident fund. Previous research during
financial crisis suggests that investors consider gold as a protection against volatile
market returns.

Light a Lamp

People’s mood can influence their judgments and risk-taking behavior, which in turn can
be reflected in their financial decision-making (Johnson and Tversky1983;
Hirshleifer2001; Baker and Wurgler2007; DellaVigna2009)
The market return on April 7, 2020 (the trading day after the event) is 8.76%, which is
much higher than the − 0.55% average returns on other days.
The first part investigates whether the light-a-lamp event helps to reduce stress and
anxiety among market participants and influences the stock market positively. If the
light-a-lamp event generates positive emotions and good mood among the investors, then
we expect to observe a positive stock market response in the post-event days.
The econometric analysis suggests that there is a 9% hike in the returns on the next
trading day of the event.
This paper contributes to the pandemic literature in the following ways. The first is the
uniqueness of the event during the pandemic time. Even though several other festivals
such as Easter and Eid appeared during the lockdown, they mostly cater to a specific
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group of people. The light-a-lamp event, however, grabbed the attention of the entire
country and flooded the related news in the media outlets. Second, we link this event with
the stock market. The existing studies during the pandemic largely focus on its adverse
effect on stock market

This study links this event with the stock market through investor sentiment and
misattribution bias. We observe sentiment-driven stock market movement in the
post-event day. There was approximately a 9% higher return on the immediate day of
the event compared to other days. Since investor sentiment causes this effect, a
reversal on the fourth day following the event, which is consistent with sentiment-
induced temporary mispricing. This study to identify the heterogeneous effect of the
event. Consistent with the limit-to-arbitrage literature, the effect is more prominent
on stocks with high beta, downside risk, and return volatility.

Impact of investor sentiment on decision-making in Indian stock market

“The focus of this study is on the stock market investors with regard
to their judgmental errors. It aims to develop an efficient investment strategy to assist
investors in order to avoid errors and become aware of how possible biases can
influence their investment decisions.”

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 The purpose of this paper is to analyze the relationship between the factors
influencing investors sentiment and investment decision-making (DM) of the
individual investors. Investor sentiment play a major role in the stock price
determination in the stock market around the world. It will be perfect if we say that
stock prices are driven by IS.

This study offers different perceptions of

investors, as they can understand the trading behavior and compare it with their own
investment characteristics.

Mix investment strategies using quantitative and qualitative behavioral finance tools
should help investors to select the proper kind of
investment strategy. IS indicates the overall level of attitude of investors toward
stocks in the financial market. This indicates moods, feelings and expectations of
investors that may have an impact on their investment DM. Sentiment influences the
price movement of a security in the market, whether the bearish market fall in prices
and bullish market rise in price, and it leads to the belief about the risk of the security
and future cash flow. The attachment of an investor with his stock can also lead to his
downfall, even if his favorite stock is crashing, he will not sell it off or book profit
because he is sentimentally attached to it.
This paper was released just before the Covid 19 pandemic so it does not cover the
sentiments of investors during the crash or after the correction as it was during this
period that the stocks fell to their 10-year lows and almost all the investors suffered
losses. And people now also considered long-term investing due to the sharp contrast
in tax rate.
The investors sentiments changed when they realised, they need to support their
family because life in unpredictable. The need to get higher returns from the idle
money they have became a main idea. Investing in stock market with different risk
aversity and returns attracted a lot of new investors in the market.
They also noticed a rise in the value of few stocks which rose from nothing to a great
high value, this was not noticeable before as people saved more and investing was not
considered important. The sentiments of the individual are very subjective and
psychological.

Impact of Covid-19 on the Stock Market and Corporate Firms in India:

In this paper direction of sector-wise movement in FII flow signals which sectors
will grow or shrink in the coming years is shown
They also discuss the possibility of ‘herding’ by the foreign institutional investors
following the current volatility in the stock market.
The focus here is on the behaviour of stock markets in India, following the
outbreak of Covid-19. They analysed the trends in daily stock prices at
BSE Sensex, taking into account the role of foreign institutional investment (FII).
This was primarily due to the net outflows of foreign institutional investments
(FII). Foreign investors have pulled out more than ₹34,000 crore from Indian
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 equities and bonds in March leading to a crash in the stock market (The Hindu,
March 13, 2020).
The pharmaceuticals and fast-moving consumer goods (FMCG) sectors
performed relatively better as they declined by 11 per cent and 9 per cent,
respectively.

The report shows that nearly 44% of the debt is in sectors which might be called
the ‘high-resilience category’. They considered another important indicator of
stock market performance viz., the price-earnings ratio (P/E ratio). P/E ratio
indicates the future movement in stock prices. Many Indian companies were
overvalued for quite some time. There was also the absence of earnings growth in
the market as well as some decline in quality large caps. Hence, the recent fall
may be considered as a step towards correcting the valuations of several
companies, and it may attract the long-term investors.
The shortcomings we found in this paper was that it focused only on the FII’s
relation to the market and DIIs were completely ignored. According to them
foreign investors create the demand and supply in the market and they are the
one’s who are affected the most with increase or decrease in stock price.

Our results indicate a relatively small annual change in individuals’ financial risk
tolerance. Although our regression model is ineffective in providing a clarification
for a change in the financial risk tolerance scores of individual respondents, we
find a slight decrease in financial risk tolerance associated with a decrease in
household size and an increase in financial risk tolerance after terminating the
services of a financial planner. From our results we propose that financial risk
tolerance is a stable personality trait and is unlikely to change substantially over
the life of an individual.

2.2 Research gap

 The factors influencing investors sentiment and investment decision-
making (DM) has never been studied simultaneously in the context of
Indian individual investors.
 In an emerging economy like India, all businesses are not owned by the
big corporate firms. A considerable portion of the economic activity comes
from the micro, small and medium enterprises (MSME) which accounts
for employment of 80 million people, 8% of the GDP and 49% of exports
in 2018-19 in India.
 The change in the market is the result of the selected sample of BSE-listed
companies and during the period considered for the study. It cannot be
generalized for other traded stocks, nor in other periods in the future or in
a different market environment.

3. Objective of the study

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  Determine consumer rating on the combination of choice in the
investment option
 Identify the factors which influences the individual’s decision
 What are the most important factors affecting investment?

4. Research Design
4.1 Exploratory Research (Any one or more Technique used by
you)
1. Depth Interview of 5 People (Videos)
2. Expert Opinion-1 Person (1 Videos)
4.2 Descriptive Research-Method
Cross Sectional Study- Conjoint
(Stocks/ETF/Mutual Funds/FD- Risk, Period, Return)
4.3 Causal research
4.4 Sampling
4.4.1 Sample Location
Pan India
4.4.2 Sample Size
142 Lakh Indians
4.4.3 Sampling Procedure

4.4.4 Sampling Unit

5. Data Collection
5.1 Secondary Data
BSE, NSE
5.2 Primary Data
Consumers
6. Data Analysis
6.1 Probable statistical tools to be used
6.2 Mean, Median, Mode, Correlation, Regression, Factor
Analysis, and Cluster.
7. Conclusion, findings to be addressed and Limitations

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Bibliography & References

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https://indianexpress.com/article/explained/an-expert-explains-making-sense-of-the-
sensex-6509574/

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