Nifty 50, Sensex hit record high but gold, silver outshine key indices of Indian stock market in YTD. Here’s why?
The current year 2024 (CY24) so far has been an excellent year for both the precious metals — gold and silver, and the frontline equity indices — Nifty 50, Sensex, and Bank Nifty. All of them reached new heights in April 2024, thanks to a broad-based rally that has rewarded investors with impressive returns. However, comparing these risky asset class returns in the year-to-date (YTD) time, gold has delivered to the tune of 13 percent return to its investors whereas silver has given around 8 percent YTD return to its investors. Among the key benchmark indices of the Indian stock market, the Nifty 50 index has risen 4.65 percent in 2024, the BSE Sensex has surged 3.83 percent whereas the Bank Nifty index has risen nearly 1.56 percent this year. So, it is clear that despite all these assets climbing to a new peak in 2024, gold and silver have outshined the key benchmark indices of the Indian stock market in YTD time.
According to the stock market and commodity market experts, gold and silver prices have outshined the Indian stock market for two major reasons — the US Fed rate cut buzz and continued gold accumulation by central banks across the world. They said that triggers that worked in fueling equities have supported gold and silver price rallies but the factors related to global uncertainties like geo-political tension in the Middle East have added extra fuel to the bullion market’s rally.
Speaking on the gold and silver price rally in 2024, Sugandha Sachdeva, Founder of SS WealthStreet said, “Gold has witnessed an outstanding run, with an increase of 13 percent year-to-date, while silver has gained over 8 percent. The Nifty and Sensex have also performed well with returns of around 4.7 percent and 4 percent, respectively. The Indian economy is thriving, with robust macroeconomic fundamentals, positive global market sentiment, strong FPI inflows, greater domestic participation, and optimism about political stability,” adding, “However, the precious metals have outshined, thanks to the hopes of monetary policy easing by the US Fed in 2024 and continued gold accumulation by central banks. Gold’s enduring appeal as a safe-haven asset, amid lingering geopolitical uncertainties and concerns about a global growth slowdown, has also contributed to its strength. Silver has also witnessed steep upward momentum, driven by rising demand for industrial applications, green energy initiatives, and a market deficit.”
Why is gold glitter more than stock market?
Asked about the reason for gold and silver outshining the key benchmark indices of the Indian stock market, Amit Goel, Co-Founder & Chief Global Strategist at Pace 360 said, “The Indian stock market has been a complete outperformer since October end of 2023 and has carried on with its upward journey so far in 2024. However, it is not Nifty and Sensex that have attracted the most domestic or global investments. It is Nifty Next 50 which has captured everybody’s attention and money and has gone up by 19% so far this year handily beating the precious metals.”
“Gold and silver had been completely sideways between March and December 23 and a breakout looked imminent to us in January. Besides both were massively under-owned by investors as is reflected by the fact that the Gold ETF holdings hit their 4 year low recently. On the other hand, equities have been quite overweight in investors’ portfolios thanks to the glorious bull run of the last 4 years. The above factors have contributed to the upsurge in precious metals and them outperforming Nifty and Sensex by a wide margin,” Amit Goel of Pace 360 said.
Pointing towards the global uncertainties, BK Sabharwal, Chair — Capital Market and Commodity Market Committee at PHDCCI said, “The Nifty 50 and Sensex have indeed reached unprecedented highs, reflecting robust investor sentiment and confidence in India’s economic prospects. However, amidst this surge, gold and silver have emerged as standout performers, outshining stock market returns in year-to-date (YTD) performance. ETF and other data signal the resilience and attractiveness of precious metals in times of economic uncertainty. While equities offer potential for capital appreciation, gold and silver have historically served as safe-haven assets, preserving wealth and providing diversification benefits.”
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The PHDCCI expert maintained that despite Nifty, Sensex, and Bank Nifty hitting a new highs, the enduring appeal of gold and silver highlights the importance of diversification and prudent risk management in investment decision-making.
Gold, silver rates outlook
“Looking ahead, both gold and silver appear to have a positive trajectory for 2024, with some corrective rallies along the way that seem to entice buying interest yet again. Profit booking may affect returns in the short term, but the outlook remains largely optimistic for both metals. Geopolitical uncertainty continues to swirl around owing to high-stakes elections in several major economies, and also the proposed three rate cuts by the US central bank during the year could influence price dynamics and keep gold and silver prices well supported,” said Sigandha Sachdeva of SS WealthStreet.
Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 11 Apr 2024, 08:22 AM IST
Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.