'Influencer' Covid Makes Investors Prefer Regular Hefty Returns With Tax Benefits: Survey

Degree of returns, regularity of returns and tax benefits are the significant factors influencing post-Covid investment decisions, said a new study.

In pre-Covid times, the degree of returns and the regularity of returns guides the decision to diversify the portfolio. Conversely, in the post-Covid pandemic years, tax benefits along with the degree of returns and regularity of returns influenced the investing decisions, said the study.

A total of 6 financial instruments were considered to assess the changing investor preferences in pre-Covid and post-Covid pandemic years including mutual funds, bonds, stocks, derivatives, gold and real estate.

The study was released by PHD Chamber of Commerce and Industry.

The questionnaire was based on multiple choice questions based on five factors including degree of risk, tax benefits, liquidity, degree of returns and regularity of returns (from Investment option).

The industry body conducted a study with the objectives to analyse the factors influencing individual investments across various financial instruments and to compare the investor behaviours towards selected financial instruments in pre and post-Covid years.

The period considered for the analysis includes two years of pre-pandemic (FY 2018-2020) and two years of post-pandemic (FY 2021-23).

Key findings of the survey:

India’s capital market has witnessed a robust performance during the post-Covid years supported by the strong regulatory environment, high growth of the economy and investors’ confidence in India’s growth story, said Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry in a press statement.

Going ahead, our capital market is seen with outstanding performance in the coming years, as India is going to be the 3rd largest economy soon and have a size of USD 7 trillion by 2030, said Agrawal.

Further, a disaggregate analysis of each factor impacting the preferences of investors in various financial instruments in the pre-Covid and post the Covid pandemic period indicates changing patterns, said the study.

The investment in mutual funds was largely influenced by the degree of returns, regularity of returns and degree of risk in pre Covid period. The post-Covid period saw more influence of liquidity rather than the degree of risk involved along with the degree of returns and regularity of returns in mutual fund investments, according to the study.

Bonds have an inherent characteristic of being secure offering fairly reliable returns. In pre-Covid scenarios, investors majorly preferred bonds due to the tax benefits offered by bonds. But after the Covid pandemic, the preference to invest in bonds is largely influenced by tax benefits along with liquidity and higher returns, said the study.

Stocks are a riskier form of investment avenue which is more volatile and can cause steep gains or losses. In pre-Covid times, the preference for investment in stocks was primarily driven by the degree of returns that the stocks were anticipated to yield in addition to the liquidity.

In post-Covid times, the investors had categorised stock investments as high-paying ones and were not looking for any other advantage like tax benefits, liquidity, etc from them, said the study.

Gold bonds or Sovereign Gold Bonds (SGBs) generally are a step by the government to graduate investors from buying gold in physical form. Tax benefits and regularity of returns governed the decision to invest in gold bonds in both pre and post-Covid times, said the study.

In pre-Covid times, while investing in real estate the investors considered its probability to be sold quickly as a major factor. In contrast, tax benefits and regularity of returns were important factors governing investment preferences in post-Covid times, according to the study.

The investment preferences for derivatives were largely governed by the degree of risk, liquidity, degree of returns and regularity of returns. However, the post-tax benefits and regularity of returns turned into significant factors impacting the preference to buy by derivatives, said the study.