Stocks trump gold despite inflation, war

MUMBAI,APRIL 1:  For common retail investors, stocks outperformed other asset classes like gold, bonds and the rupee in the fiscal year 2022. The bullish trend is likely to continue in the new fiscal year amid the spectre of rising retail prices, hardening interest rates and geopolitical tensions.

Those who invested in mutual funds linked to the Nifty Midcap 100 index, for the purpose of this comparison, earned the best returns (see chart), followed by large cap funds which invested in the Nifty and Sensex indices.

Gold yielded 14% return, while the 10-year bond yield rose 8.5% and the rupee depreciated by 4.68%

Market experts like Vijay Kedia, MD, Kedia Securities, expects metal and cement stocks to outperform other stocks in the new fiscal. He also expects metal stocks to outperform other asset classes like gold and bonds. “A bull market is like sunshine, always there somewhere,” Kedia said, adding that the market which has weathered the storms of rising inflation, hardening interest rates (in the US) and the Russian invasion of Ukraine more recently, continues to hold promise.

FIIs have sold $18.4 billion worth of equities in the past fiscal year, out of which the March quarter alone accounted for four-fifths of their sales. However, despite this, mavens including Kedia and SK Srivastava , founder IndiaCharts, remain bullish on stocks. Srivastava feels the Nifty is headed to a new record high, surpassing the peak of 18604.45 on October 19, 2021, fuelled by bullish domestic institutional and retail buying.

Gold could retain its attractiveness as an inflation hedge and safe haven asset, which could test its record high of `56029 per 10 gm on August 7, 2020 as a fallout from the Pandemic. Indian gold consumption is the world’s second-highest after China. In the last seven years, barring 2020, average annual gold demand in India remained around 716 tonnes, according to Debajit Saha, lead metals analyst at London Stock Exchange Group (LSEG).

The gold demand fell to 337 tonnes in 2020 as the country went under lockdown due to the pandemic. Bond yields could rise as RBI raises its benchmark repo rate by a cumulative 50 basis points to combat rising inflation, with energy and crude making up 52% of the CPI.

-TNIE