Real estate continues to look good, commercial more than residential, say observers
Samvat 2066 was an average year for equities. But, commodities, led by silver and gold, and residential real estate, outperformed returns among all asset classes. Going forward, equities remain attractive, but there is a sense of caution for gold in the short term. Commercial real estate is expected to perform better than its residential counterpart.
In Samvat 2066, returns from equities were 20.6 per cent (Sensex), cotton gave the highest return, of 87.5 per cent, followed by silver at 40.3 per cent and gold at 24.9 per cent. Residential properties gave returns of 30-50 per cent, depending on the location. If one goes by the past five years of returns, gold and silver have clearly outperformed equities. Among other commodities, agriculture performed better than metals, though they returned slightly less than equities.
However, in the past one year, leading global agri and metals indices have outperformed equities (see table).
Case for equities
Going forward, ‘slow and steady wins the race’ seems to be the theme. ENAM Group Chairman Vallabh Bhansali said: “If the equity market rises steadily, it has the potential to give above-average returns in the coming Samvat year. Given where interest rates are, the next six months look very good for equities in any case.”
ICICI Prudential Asset Management Deputy Managing Director Nilesh Shah advises patience. He says: “India is benefiting from the wealth effect, through appreciation of land, gold and equity prices. If the government can raise productivity across the economy through better governance, this wealth effect can be sustained and not get converted into a bubble. Investors have to learn the art of investing. Even God cannot deliver a mango before 12 years. Don’t expect markets to deliver returns prematurely.”
ENAM Group’s Bhansali also believes gold will continue to be an asset class to reckon with, given the currency problems the world is facing.
With a five-year return of 186 per cent compounded and 227 per cent for silver, bullion has been a best-performer asset class. Equity returned 163 per cent. Commtrendz Research director Gnanasekar Thiagarajan said: “In India, commodities as an asset class have not gone beyond gold and silver. While in the coming months some exchange-traded products in commodities may be launched, bullion would remain a preferred commodity for allowing investments from a policy perspective.”
| ALL THAT GLITTERS MAJOR EQUITY INDICES AND COMMODITIES | |||||
| Date | Nov 1, 05 | Oct 17, 09 | Nov 4, 10 | 1 year | 5-year |
| Samvat | 2061 | 2065 | 2066 | - | - |
| Commodity | |||||
| Cotton Shanker-6 (Rs/qtl) | 4,865.00 | 6,524.00 | 12,232.00 | 87.49 | 151.43 |
| Silver .999 (Rs/ kg) | 11,795.00 | 27,475.00 | 38,550.00 | 40.31 | 226.83 |
| Gold 99.50 (Rs/10 gm) | 6,895.00 | 15,800.00 | 19,735.00 | 24.91 | 186.22 |
| Sugar M30 (Rs/qtl) | 1,937.50 | 3,172.50 | 2,846.00 | -10.29 | 46.89 |
| Equity Indices | |||||
| Sensex | 7,944.10 | 17,326.01 | 20,893.57 | 20.59 | 163.01 |
| Dow Jones | 10,406.77 | 9,995.91 | 11,215.13 | 12.20 | 7.77 |
| Global Commodity Indices | |||||
| S&P GSCI Agric Index Spot | 189.93 | 325.02 | 467.24 | 43.76 | 146.01 |
| London Metal Index | 2,106.40 | 2,932.00 | 3,830.80 | 30.65 | 81.86 |
| Reuters/Jefferies CRB Index Spot | 280.79 | 275.70 | 308.19 | 11.78 | 9.76 |
| S&P GSCI Energy Index Spot | 232.19 | 263.11 | 282.52 | 7.38 | 21.68 |
| Compiled by BS Research Bureau | |||||
On specifics, he said: “Gold has risen a lot and, hence, those who want to invest can wait for correction.” His logic is that investors will soon realise that second dose of stimulus or quantitative easing (QE2) will prove good for the US and result in growth, which could reduce gold’s appeal for hedging, and profit-booking will bring a much-needed correction here. He does not rule out a $100 correction from the current level.
Diwali fireworks at BSE, Sensex closes above 21k
Investors could not have asked for a better start to Samvat 2067. Asia’s oldest stock exchange saw its benchmark, the Sensex close above the psychological mark of 21,000 for the first time ever, as investors placed token trades for an auspicious start to the new year. The undertone in the 90-minute Muhurat session was clearly bullish, with most experts predicting another “cracker of a year” for the Indian equity market.
The 30-share Sensex of the Bombay Stock Exchange (BSE) opened the new Samvat at 21,045.66, up 152 points over Thursday's close. It marched further north to touch a high of 21,108.64, before some amount of profit booking brought it below the 21,000-mark, only to last for a brief period. The Sensex ended the special trading session at 21,004.96, gaining 111.39 points or 0.53 per cent. This is the second such instance since 1995 when the Sensex gained more than 100 points during a Muhurat session. It had gained nearly 500 points in 2008.
The broader 50-share Nifty of the National Stock Exchange (NSE) breached the 6,300-mark to close at an all-time high of 6,312.45, up 30.65 points or 0.49 per cent. The turnover on NSE was a little over Rs4,200 crore.
