Thursday, November 30, 2023

dhanteras: With 20% return, gold outshines Sensex since last Dhanteras. Is yellow metal the safest sparkler?

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As India celebrates Dhanteras today, gold investors would be sitting on near 20% returns accrued by the yellow metal since last Dhanteras. As an asset class, yellow metal has outperformed its equity market peers in Nifty and the BSE Sensex during this period.Gold’s returns are neary two-fold in comparison to Nifty and Sensex which have delivered returns of 10.34% and 9.31%, respectively, since last Dhanteras which fell on October 22, 2022. On October 21, 2022, the price of MCX gold futures was near 50,000, while Sensex and Nifty stood at 59,307.15 and 17,576.30.

Gold’s haven appeal is expected to remain strong amid geo-political tension, uncertainty over interest rate regime and next year’s general elections in India and the US. Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart expects MCX prices to move towards Rs 64,000 to Rs 66,000 levels in 2024 with a crucial support lying at Rs 56,000. As for MCX silver contract prices, they could test levels between Rs 78,000 and Rs 80,000 per kg levels in the upcoming year.

The above estimates translate into a 10% uptick in gold while a 13% gains in silver over the current market price of both precious metals i.e. Rs 60,267 in the former and Rs 71,450 for the latter.

In comparison, a recent report by Morgan Stanley said that Sensex and Nifty50 could rise up to 10% in the run up to general elections in April 2024 in anticipation of continuity and a majority for the incumbent according to the report.

The report warns investors of volatility following the elections which could result in swings between 5% and -40% depending upon the outcome of the elections.Read More: Sensex, Nifty may rise 10% in rup-up to 2024 Lok Sabha elections: Morgan Stanley

Brokerage Prabhudas Lilladher has cut its Nifty target estimates to 20,735 from an earlier 21,430 which is a 3.2% downgrade, expecting domestic markets to consolidate ahead of the elections. The revised 12-month target is now a near 7% upside on Nifty’s Thursday’s closing of 19,395.30.

Read More: Prabhudas slashes Nifty target to 20,735 ahead of polls; lists SBI & Tata Motors as top bets

Meanwhile analyst Amar Ranu, Head-Investment Products & Insights at Anand Rathi Shares and Stock Brokers throws-up a counter view. “In last 15 years, Sensex has averaged about 13% versus gold return of 11-11.5% though the latter comes at 2/3rd of risk (Standard Deviation) of equity,” Ranu said adding that it made more sense to increase allocation towards equity and if one wants to create allocations for gold (in all formats), it should be limited to 5-10% of total portfolio.

According to him Dhanteras should not be taken as an excuse to create wealth by buying more gold notwithstanding its importance as a Hindu festival. Investors should assess their risk profile before deciding investments in equity, debt or gold, he argued.

Putting his weight around gold investment, analyst Anuj Gupta, who Heads Commodity & Currency division at HDFC Securities said that allocation up to 20% could be done in a portfolio as he remains bullish on the long term prospects of gold.

Gold prices are expected to move towards a medium target of Rs 63,000 according to estimates by Motilal Oswal Financial Services.

Gold ETFs gain currency
A report by ICRA Analytics highlights how the investors appetite for gold ETFs is gaining ground in India. The report finds some ETFs to have generatied one-year returns of more than 22%.

Gold ETFs have witnessed net inflows worth Rs 1,660 crore during July-September 2023 period as against net outflows of Rs 165 crore during July-September 2022. The net assets under management (AUM) under gold ETF as on September 30, 2023, grew by nearly 20% to touch Rs 23,799 crore, as against Rs 19,861 crore in the same period last year, the report said.

There are currently 13 gold ETFs in the domestic mutual fund industry and based on 1-year returns LIC MF Gold ETF was the top performing fund generating 22.46% as on October 31, 2023, as per data report by ICRA Analytics which analysed 11 gold ETFs. The two which were not analysed were DSP Gold ETF and Mirae Asset Gold ETF which have not completed one year as on October 31, 2023.

The returns by others hovered around 20.6%, the report noted. The 5-year CAGR returns across most of these funds range between 12.84% and 13.32%, Ashwini Kumar, Head Market Data, ICRA Analytics said in a media release.

(Inputs from Ritesh Presswala)

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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