With Diwali round the corner, investors in gold with their fat 15 per cent gain since last Diwali, appear to be headed for a hat-trick of better returns than stock markets.
The returns from stock markets, as measured by its benchmark index Sensex, has been a fixed deposit-like gain of about 8.5 per cent for the same period.
With the precious metal rising from Rs 26,700 levels last Diwali to Rs 30,700 at present, an investment of Rs 10 lakh would have appreciated to close to Rs 11.50 lakh now. The total gains by Diwali day next week could be even more as some experts predict that gold may breach its record price of over Rs 32,000 as demand outstrips supply on days of Dhanteras (November 12) and Diwali (November 13).
While stock markets have also given positive returns since last Diwali, the performance has not been as robust as that of the yellow metal.
The BSE benchmark Sensex has risen from near-17,300 levels to 18,755 since last Diwali — resulting in the appreciation of a Rs 10-lakh investment to close to Rs 10.85 lakh now.
While stocks are still looked upon as a risky asset class despite attempts to inculcate an equity culture in the country, gold, besides investment, has been used for gifting and purchses during auspicious festive days.
This Diwali will be the third instance in a row when the precious metal would outshine the stock markets’ returns on a year-on-year basis, even as gold continues to be called an ‘idle asset’ for investment purposes.
While the Sensex fell over 17 per cent in the one-year period till Diwali 2011, gold came to the rescue of hapless investors with a 36 per cent rally during the same period. Prior to that, gold had delivered a stellar 24.5 per cent one-year gain on Diwali 2010 — still better than a little over 21 per cent gain by the Sensex in the same time.
However, the stock market had outperformed gold on a year-on-year basis on Diwali day in 2009, when the Sensex had seen a staggering 92 per cent rally in comparison to a relatively modest 34 per cent gain by gold. Earlier, investors had lost over half their stock market wealth between 2007 and 2008 Diwalis, while the safe-haven demand for gold had helped it notch up an 11 per cent return.
