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Investors are adding gold to their portfolios as part of their diversification even as relentless rally in the equity market has taken valuations to dizzying heights despite the prevailing uncertainty in economy.
The number of folios under Gold Exchange Traded Funds (ETF) increased 10 per cent last month to 18.32 lakh from 16.68 lakh in May with gold prices holding steady above the ₹47,000-per-10 gram mark. In fact, the folio count of gold ETF has jumped 41 per cent in last six months from 12.99 lakh, with inflows touching ₹3,106 crore.
Assets under gold ETF have jumped 14 per cent in June quarter to ₹48,477 crore against ₹42,707 crore in the March quarter.
Himanshu Srivastava, Associate Director, Morningstar India said although redemptions were higher last month compared to May with few investors booking profit, mobilisation shot up sharply despite steady rally in prices.
Higher mobilisation along with increase in folio numbers indicate that gold as an asset class has been attracting a greater number of investors, he added.
Safe haven
Traditionally, gold is considered a safe haven given its ability to act as an effective diversifier and alleviate losses during tough market conditions and economic downturns.
During the challenging investment environment over the last few years, gold emerged as one of the better performing asset classes, thus proving its effectiveness in investors’ portfolio.
Priti Rathi Gupta, Founder of India’s first financial platform for women, LXME, said investors are trying to rebalance their portfolios to safeguard their investment as the capital market has turned volatile after hitting an all-time high.
With equity markets hovering around all-time high levels, Gupta said investors are wary given the uncertainty in economy and want to hedge their portfolio with investment in gold ETF. Gold prices have been rallying steadily for last few months. It touched ₹48,108 per 10 grams on Wednesday against ₹45,976 logged on March 1, a gain of five per cent.
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