A qualitative examination of changing investment preferences, sentiments and behavioural tendencies in COVID-19: a special case of Indian individual investors

Abstract

Purpose – This paper aims to identify changes in individual investors’ preferences, prominent sentiments in the market, behavioural tendencies and biases demonstrated as a result of the COVID-19 pandemic. Design/methodology/approach – As the study is exploratory social research, the design is also structured as such. In total, 69 Securities and Exchange Board of India-registered investment advisors catering to investors of diverse profiles, experiences and locales are engaged through in-depth semi-structured interviews. The responses are categorised thematically using a data structure model. Findings – Investors are guided by an inclination for safer and liquid asset classes and prefer fixed income securities. The authors observe various emotional reactions – inexperienced investors panic, experienced investors act maturely, while a few of both naïve and sophisticated investors are opportunistic contrarians. Lower valuations, ease of access to digital infrastructure for trading and social norms attract many first-time individual investors, causing a phenomenon identified as the “new investor boom”. Apart from the biases identified during the financial crisis, the authors also detect evidence of cognitive dissonance, bandwagon effect, fear-of-missing-out syndrome, disposition effect and others. Practical implications – The paper also discusses some noticeable behavioural tendencies displayed by the individual investors and compiles helpful strategies to successfully navigate any such financial crisis. Social implications – An individual investor is a least aware and most affected stakeholder in any crisis, so this study contributes newer insights to ensure their financial well-being. Originality/value – The study’s originality lies in adopting a qualitative methodology that uses investment advisors’ professional experience to unveil the sub-structures of investor psychology and decision-making behaviour during COVID-19.