Equities outperform gold by giving 23% returns so far this year

Indian equities have overshadowed gold’s glitter by giving handsome returns of almost 23 per cent to investors so far this year.

While the BSE’s 30-stock benchmark index Sensex has logged in 22.76 per cent growth for investors so far in 2014, gold prices have fallen by 5 per cent. Silver however, managed to generate a marginal return of 2.38 per cent.

According to market experts, this year is proving to be good for the Indian equities, riding high on improved domestic investor sentiment and robust foreign fund inflows.

Gold and stock prices generally follow opposite trends.

Hedge against inflation

Gold is normally preferred as a hedge against inflation, and investors tend to park their money in bullion considering it a safer bet at times of market uncertainties.

After outperforming stock markets for more than a decade, gold has been on the back foot for more than two consecutive years now vis-a-vis equities.

Gold price were ruling at Rs 29,800 per 10 grams on December 31, 2013 and silver at Rs 43,755 per kg. While gold closed at Rs 28,370 yesterday, silver ended at Rs 44,800.

On the other hand, Sensex, which was at 21,170.68 points on December 31 last year, settled at 25,991.23-level yesterday. It recorded its all-time high level of 26,300.17 on July 25.

Foreign fund inflows

Overseas investors, major drivers of Indian equities, have made a net investment of $25.5 billion (Rs 1.53 lakh crore), since the beginning of the year.

Last year, the Sensex gave a positive return of about 9 per cent to investors, while gold prices fell about 3 per cent and silver plummeted close to 24 per cent.

In 2012, the Sensex rose over 25 per cent, which was nearly double the gain of about 12.95 per cent in gold prices. The appreciation in silver was at about 12.84 per cent in 2012.

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