In an unexpected comeback, gold has turned out to be the best investment for Indians so far this year, gaining seven per cent. For global investors, however, the precious metal did not hold the same sparkle, with prices falling 16 per cent in dollar terms. In India, gold price performance has conformed to the conventional wisdom that it moves in the opposite direction to equity. It’s been a roller coaster ride for equity investors this year. The BSE 500 Index has lost 12 per cent since January because of the concerns over slowing profit growth for companies and the sluggish economy. But gold has held steady.
Helped by rupee
Three factors helped gold prices in the Indian market defy global trends. The rupee’s 16 per cent depreciation against the dollar was one factor boosting domestic prices. The Government did its bit, hiking import duty on gold from two per cent at the start of the year to 10 per cent last month. That contributed eight per cent to gold price returns.
The many curbs on gold imports also resulted in shortage of the yellow metal and domestic market prices soared far beyond the international rates.
While gold fared well, other asset classes suffered heavy reverses this year. Equity mutual funds based on large-cap stocks lost 11.4 per cent since January 2013. Those investing in mid- and small-cap stocks saw an18.8 per cent erosion in their NAVs (Net Asset Value) during this period.
Debt funds lag
Bond funds, many of which managed a double-digit return last year, sagged too. The liquidity-tightening measures of the RBI to check forex market speculation led to a spike in the benchmark G-Sec yields. Short-term debt funds on an average clocked a 3.6 per cent gain, while long-term debt funds saw a meagre two per cent rise in their NAVs in the last eight months.
Fixed deposits provided some respite for investors, offering 8.5-9 per cent interest in the last one year.
After faring well last year, real estate didn’t provide sure-shot returns either. Residex, the National Housing Bank’s realty index, showed prices dipping in Kolkata and Chennai. Mumbai and Delhi reported modest gains in property prices the last six months.
Source: Hindu business line.
Source:Bullion Bulletin