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Gold Outshines Equity, Others Asset Classes
Sep 24, 2012 6:31 AM
By Dilipp S Nag
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RAPAPORT... Gold has experienced a resurgence in terms of the returns it is providing to Indian investors, while the stock market has turned negative in the past three years, according to an ASSOCHAM study.
ASSOCHAM noted that those who invested in gold during August and September of 2009 have seen their investment more than double, thanks largely to a record price run for the yellow metal. On the other hand, investors in the equity market have seen their wealth erode in the same period, with steep erosion for retail investors who generally invest in the small mid-cap stocks, it added.
The study noted that real estate property, which is generally out of reach for the small investors, too has seen good returns but not as much as gold, which often outshines all other investments when the global economy is tumultuous.
The standard price for gold in India is above $592 (INR 32,000) per 10 grams, yielding more than double the returns on investment compared with three years ago, ASSOCHAM said. Gold has seen a sharp increase even on the London Metal Exchange (LME) and is now selling above $1,700 per ounce, up from $900 to $1,000 per ounce in 2009.
But the high point of the benchmark Sensex in 2009 and 2010 was 17,711 points and today, it is trading at the same level, ASSOCHAM explained. Therefore, investment equities have not even yielded as much as simple bank interest rate bumps and are negative in terms of offering an actual yield. The Sensex hit 20,873 in 2007, whereas it is bound between the range of 17,000 and 18,000 now, the ASSOCHAM study noted.
D.S. Rawat, ASSOCHAM’s secretary general, stated that both local and global investors have adhered to the conventional wisdom of gold being the safest bet when there is uncertainty about all other investment avenues. “Thus, it will be wrong to blame Indian passions for gold, as if it is only this passion, which led to a big yellow metal import of $60 billion in fiscal 2011-12. There are global risk aversion factors at play,” Rawat said.
Additionally, ASSOCHAM concluded that property prices have provided an average yield of 40 percent to 50 percent on all-India basis. It is true that property prices in some areas of big cities, such as Delhi, Mumbai, Chennai and Gurgaon, have doubled in the past three years, these cases are far and few, the study noted. There are also cases in cities such as Hyderabad where the investors have not obtained a yield based on simple interest rates in property.
"Net-net, gold has absolutely outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays," Rawat concluded.
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Tags:
asset, ASSOCHAM, Dilipp S Nag, Gold Import, Gold
Equity, Import, India, prices, Property, Rapaport, Return, Sensex
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