No safe havens for investors amid market rout
Assets such as gold, real estate and fixed income have not yet turned attractive for investors
MUMBAI: Despite the meltdown in equities, other competing asset classes like gold, real estate and fixed income may not have become attractive options for investors yet. Indian markets, which gained around 27% in 2017, have slumped nearly 6% in the last six trading sessions. Stocks in the US, Asia and other global markets, too, have seen sharp sell-offs this week.
Gold, considered a safe asset to hold in volatile times, rose around 13% last year, followed by another 3% this year. However, analysts said it is too early to seek safe haven assets.
According to Deepak Jasani, head (retail research) at HDFC Securities Ltd, fresh surplus of funds may shift to fixed income equities. “The portion of the already invested equity funds may get into fixed income, but the major portion will stay in equities. However, if there is a 12-15% sell-off from the record market highs, it could trigger faster shift into fixed income instruments,” he added. Jasani said the equities markets had risen too fast and discounted too many positives in advance.
Pankaj Pandey, head of research at ICICI Securities Ltd, says for gold to be an attractive asset class, inflation needs to be at elevated levels and the equity markets environment has to be far more hostile.
According to commodity analysts, gold may become an attractive investment option only partially, following the correction in equities. Kishore Narne, head of commodities at Motilal Oswal Commodities Broker Pvt. Ltd, said that global volatility and inflation are going to drive gold prices.
However, he said equity investors are unlikely to shift funds to gold partially also due to the weaker currency. “It is too early to say if investors will migrate to gold investment due to correc- tions in equities. Whenever there is a volatility in equities, gold becomes attractive,” Narne added.
Madhavi Mehta, an analyst at Kotak Commodity Services, said that overall interest in gold was low last year due to rising equity markets, but the market decline is unlikely to drive interest in the precious metal.
According to the World Gold Council’s (WGC) February 6 Gold Demand Trends report, gold demand rallied in the closing months of 2017, gaining 6% yearon-year in Q4 to reach 1,095.8 tonnes, but overall demand for the full year fell by 7% to 4,071.7 tonnes, compared with 2016.
In 2017, India’s gold demand grew 9.1% to 727 tonnes from 666 tonnes in the previous year.
In the December quarter, demand was up 2% to 249 tonnes, and within that, jewellery demand reached the highest fourth quarter level that WGC saw in 17 years.
As policy measures unfold, WGC is optimistic that demand for gold in 2018 will stabilise at 700-800 tonnes.