Gold zooms 15%, stock wealth grows at snail’s pace

Gold has sparkled for investors, having given them handsome 15 per cent returns in the past one year period to September, while contribution from stocks to their kitty has remained almost negligible during the same period.

Also, the government and Reserve Bank have been urging investors recently to deploy their capital in instruments like stocks and mutual funds, rather than keeping them in idle assets like gold.

Gold has appreciated from Rs 27,400 level in early September of 2011 to a record of over Rs 32,000 level at present.

A comparative analysis of equity market trends shows that the combined investor wealth of all categories of shareholders across nearly 3,000 stocks has hardly budged from around Rs 62 lakh crore-mark in the 12-month period ended September 7.

With savvy investors taking exposure of the stock market through mutual fund route as well, the stagnant prices of shares reflect in the net asset values of around half of the 350-odd equity funds which have failed to return even one per cent in the past one-year period.

Interestingly, the Reserve Bank of India earlier this month urged the public against choosing gold as an asset for savings or investment.

“Because interest rates are very low, people are investing in gold. But the poor should never invest in gold for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at the most, it may be given away during a daughter’s marriage,” RBI Deputy Governor K.C. Chakrabarty had said.

Prior to that, Finance Minister P. Chidambaram as well last month favoured encouraging more people to invest in financial instruments rather than in gold, while urging the capital market regulator SEBI to consider fresh market reform measures for the benefit of investors.

“More and more households should be encouraged to save in financial instruments rather than in gold,” Chidambaram had said a day after Sebi’s board on August 16 announced wide-ranging reforms for IPOs and mutual funds — the two instruments aimed at attracting retail investors to market.

However, the investors continue to remain enamoured by the glitter of gold.

Even though certain duties on gold have increased post-Budget and rupee’s weakness against the US dollar has added to the landed costs of imports, Indians’ appetite for the yellow metal has seen it scaling new peaks almost every passing day in the recent past.

Apart from notional gain made in investments in jewellery, money put in gold exchange traded funds has swelled by 14-15 per cent as they closely track domestic prices of the yellow metal.

In striking contrast, the Sensex is nearly 20 per cent below its life-time high of 21,206.77 points hit in January 2008 and most analysts see no immediate light at the end of the tunnel.

The appetite for IPOs has remained tepid with nearly 50 per cent of the new listings since September, 2011 trading below or close to issue prices.

Gold’s sparkle has not dimmed a bit after calendar year 2011 witnessed it trumping stocks with a solid 31 per cent rise in prices while the volatile share market wiped off about 25 per cent of investor wealth from January-December, 2011.

The uninspiring performance of the stock market, however, hasn’t seen any major reversal as yet. The 30-share blue-chip index BSE Sensex has inched just 500 points higher over the last 250—odd trading days so far from 17,200 levels to nearly 17,700 levels.

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