In the wake of the Covid-19 pandemic, a surge in domestic investment flowed into India’s stock market. According to some, this exuberance resulted from several notable developments during the preceding years, including the launch of affordable internet and a wave of government financial literacy initiatives. But is that view correct? And what lessons can investors take from this phenomenon? In this report, we look at a study that addresses these questions and analyses the factors reshaping India’s investment landscape.

LITERATURE

The paper explores the role of domestic investors in the Indian stock market, particularly after Covid-19, examining their investment behaviour and the factors influencing it. The study uses various econometric models to understand the effect of these behaviours on market performance and volatility. Titled Role and Determinants of Domestic Investors’ Behaviour in the Stock Market: An Empirical Analysis of Post Covid-19, it is authored by Mohammad Asif, Karimullah and Sulaiman Aldhawyan.

QUICK VIEW

• Dummy variable regression was applied to explore the impact of qualitative factors such as financial literacy, technological innovation and Covid-19 on domestic investment behaviour.
• The analysis considers both institutional and retail investors, comparing their effects on two major Indian stock indices: the Bombay Stock Exchange (BSE) Sensex and the National Stock Exchange (NSE) Nifty 50.
• The study period covers the period from January 2012 to June 2022, which captures significant events like demonetisation, the launch of Jio and the Covid-19 pandemic.
• It measures domestic retail and institutional investors’ buying and selling behaviour using a variety of financial metrics.
• It finds that institutional investors have more of an impact than retail.