Post-Covid, Investors Seek Returns And Tax Benefits: Survey

The degree, regularity of returns and tax benefits are the significant factors influencing the post-Covid investment decisions, said a study jointly conducted by the PHD Research Bureau, PHD Chamber of Commerce and Industry, and Jagan Institute of Management Studies (JIIMS), Rohini.

The report titled 'Investment patterns and preferences of Indian retail investors: Covid as an influencer’ stated that a total of six financial instruments were considered to assess the changing investor preferences in pre and post-pandemic years including mutual funds, bonds, stocks, derivatives, gold and real estate.

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 (PHDCCI).

Going ahead, India's capital market is seen with outstanding performance in the coming years, as India is going to be the third largest economy soon and have a size of USD 7 trillion by 2030, said Agrawal. The survey revealed that in pre-pandemic times, the degree of returns and the regularity of returns guided the decision to diversify the portfolio. Conversely, in the post Covid-19, tax benefits along with the degree of returns and regularity of returns influenced investing decisions.

It added that the investment in mutual funds was largely influenced by the degree of returns, regularity of returns and degree of risk in pre Covid period. While 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 the mutual fund investments, said the study.

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

Notably, 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 which the stocks were anticipated to yield in addition to the liquidity. In post Covid times, the investors had categorized 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 prevent 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 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-pandemic, the study added.

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, according to the study.