MUMBAI:
A year ago, Gold, at Rs 27,385 per 10 grams was not only expensive but a
lucrative investment bet given the kind of run-up seen in its prices
ever since the financial meltdown of 2008. Taking cue from its historic
run-up, many investors had thronged to buy gold
then that eventually crossed Rs 32,000 per grams in September '12,
prompting investors to buy even more of the yellow metal anticipating
even better returns. Today, a year down the line, these
investors have nothing much to cheer about. The consistent correction in
the prices of the yellow metal over the past six months has resulted in
mediocre 6% returns for those who invested in the yellow metal a year
ago.
BSE Sensex, on the other hand, has risen by over 9.2% during this period while
mutual funds investing in large and mid cap stocks, generated 8.36% on an average, during this period.
To put it simply, after having emerged as a strong hedge against
inflation
and a contra investment option to equity markets over past five years,
gold has begun to mellow down sending strong signal to those obsessed
with the yellow metal that is probably is the time to look beyond. It
probably is time, once again, to consider
equities
for a larger part of one's investment portfolio after providing for
risk-free investment options like bank fixed deposits, PPF and other
similar products.
While many investors may be perturbed by the
recent crash in the mid-cap stocks, market analysts suggest that the
crash was more peculiar for
stocks
with relatively weaker balance sheets or where pledged shares were
getting sold in bulk. Stocks of companies with fairly strong balance
sheets and visible growth models continued to do well even during the
market crash.
Thus, even as the S&P BSE Small Cap and
Midcap indices fell by 15% and 8% respectively in the past three months,
the average decline in the
net asset value
of the midcap mutual fund schemes was lower at 5.4%. Gold too declined
by close to 5.4% during this period. However, S&P BSE
Sensex generated over 1% gains in the past three months, outperforming the gold returns by healthy margins.
CA. Rajesh Desai