Sensex tanks 10% year-to-date, it is time to invest in gold

The 30-share index Sensex and 50-share index Nifty tanked 10 per cent since the beginning of the ongoing calendar year 2016 so far.

Gold prices - Brexit move
Gold prices may rally further if Britain leaves the European Union after the June 23 referendum, said analysts.(Photo: Reuters)

In a tug of war between bears and bulls in the domestic equity markets, experts are advising investors to stay away from stock markets as benchmark indices BSE Sensex and NSE Nifty can shed some more weight in the near future. The 30-share index Sensex and 50-share index Nifty tanked 10 per cent since the beginning of the ongoing calendar year 2016 so far.

Sensex declined to 23,554.12 levels on February 15 from 26,160.90 on January 1. Similarly, Nifty fell from 7,963.20 to 7,162.95 during the same period.

Foreign portfolio investors (FPIs) have offloaded equities worth Rs 13424.10 crore from the Indian markets in the calendar year 2016. However, domestic institutional investors bought shares worth Rs 17164.56 crore during the same period.

According to market experts, selling by foreign institutional investors was mainly on account of outflows from global emerging market (GEM) benchmarked funds and redemption pressure from sovereign wealth fund (SWF) investors globally.

In this scenario, whether an investor should stick to stock makets or put his/her money in yellow metal. Advocating gold as a better investment, Nikhil Kamath, co-founder and director, Zerodha, said, “Overall the scenario continues to remain bearish, we would advise investors to stay with gold and fixed income for the time being and to avoid equities completely.”

Global gold prices are on upward trajectory since the ongoing global equity sell-off. The price of yellow metal in the international market jumped from $1060.10 per troy ounce on December 31 last year to $1239.10 per troy ounce.

Kunal Shah, head of research, Nirmal Bang Commodities suggested investors to stay with the yellow in the present market scenario. “I recommend investors to stay invested in gold in the current economic environment. Asset like gold has very high intrinsic value and hence if you will not get 10-15 per cent from here but the metal will preserve your wealth if some major damages will happen in the global economy. I believe gold can test Rs 32,500-33,000 per 10 gram by the end of December 2015,” he said.

Following the international trends, gold price in India surged 17 per cent to Rs 29305 per 10 grams on Feb 12 this year from Rs 24994 on Dec 31 last year. Earlier, gold prices plunged 5 per cent, 9 per cent and 6 per cent in the past three consecutive calendar years 2013, 2014 and 2015, respectively.

Vandana Bharti, AVP (commodities), SMC Comtrade, said, “The reason for the rise in gold prices can be attributed to a decline in global economic sentiment and plunge in stock markets increased its demand of gold as safe haven.”

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