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.