The financial landscape is betraying signs of nervousness – return of volatility in the Indian stock markets, continued nervousness in the global markets, lingering apprehension of recession in the US, stubborn geopolitical tensions in West Asia and new volatility in Japan. Add to this the continuous stretched valuations in the many stocks in the Indian markets.
Time for diversification
Experts have started saying that one should consider gold as an avenue for portfolio diversification. Chintan Haria, principal-investment strategy, ICICI Prudential AMC told News9live.com that retail investors can consider putting their money in gold Exchange-Traded Fund (ETF).
Recommending gold ETFs, Haria said, “Over the long term, gold is also a beneficiary of the depreciation of the rupee against the dollar. The latest tax rule in the Union Budget brings an added attraction.”
Shines in crisis
Explaining how gold shines during crisis, Haria pointed out five instances of crisis around the world since 2008. “During the global financial crisis of 2008, the Nifty fell 51.3%, but gold prices (MCX) rose by a healthy 26.3%. In 2011, when equities were reeling under the Eurozone sovereign debt crisis, the Nifty fell 23.8%, even as gold rallied to the tune of 31.7%,” he said.
“Amidst the volatility after Brexit in 2016, Nifty delivered just 4.4% return, while gold gave 11.4%. In the COVID year of 2020, gold prices rallied 28%, while equities rose by 16.1%. During the high inflation year of 2022, Nifty increased by a mere 6.9%, but gold prices rose 14.2%,” Haria added.
Significance of rupee depreciation
The investment strategist also pointed out how depreciation of the rupee against US dollar works in favour of the investor. “In the past 10 years, the rupee has depreciated by around 37.34% against the dollar. Though this does not happen in a linear fashion, the depreciation translates to a rate of 3.2% annually. This adds to gold’s returns,” he said.
Taxation
Following the budget of FY25, long-term capital gains on holding ETFS for more than 12 months are taxed at 12.5%. Earlier, such gains were added to the income and taxed at the applicable slab of the investor and the holding period did not matter. No STT (securities transaction tax) is applicable on ETFs.
(Disclaimer: This article is only meant to provide information. News9live.com does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds or ETFs.)
Gold ETF investment: Gold is recommended by experts as an everlasting value and as an instrument for hedging, especially in times when other class of assets are facing question marks. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
