News Bulletin and Market Update: 11/10/2021

News Bulletin

▫️ Andhra Pradesh, Delhi and Rajasthan seeks centre support for power crisis.

▫️Centre clears the fear over coal crisis and said there is enough coal with Coal India Limited and power companies to provide power to the country.

▫️Reliance Industries bought foreign solar panel equipment manufacturer REC Solar Company for ₹5,800 crores.

▫️ Reliance Industries acquired 40% stake in Sterling and Wilson solar for ₹3,630 crores.

▫️Auto retailers to face losses this festive season due to chip shortage, which is hurting vehicle dispatches.

▫️ Govt. to revamp telecom licensing process.

▫️India’s active covid case load reached lowest in 208 days.

▫️ Govt. allowed newly set up petrol pumps to set up EV charging stations and CNG outlet even before starting sale of petrol and diesel.

▫️Pradeep Phosphates to expand its manufacturing capacity.

▫️RBI’s decision to take control over defaulted SREI, will prevent domino effect.

▫️Government to initiate disinvestment of IDBI Bank by December.

▫️ Centre imposed stock limits on edible oils and oil seeds to tackle rising prices.

▫️ Metropolitan Exchange of India may not get its licensed renewed after it failed to raise sufficient funds.

▫️FPIs pulled out ₹20,000 crores from banking sector between Apr-Sep and invested in consumer goods, IT, pharma and telecom.

▫️ Disinvestment of BPCL and Shipping Corporation to be completed by FY22.

▫️ E-commerce companies sold goods worth $2.7bn in first 4 days of festive season sale.

Market Update

▫️ Indian markets soared to record high on Friday, after RBI kept key rates and accommodative stance unchanged to support economic recovery.

▫️Sensex climbed 0.64% to 60,059.06, while Nifty jumped 0.59% to 17,895.

▫️Market breadth was mixed with advance decline ratio of 974:853.

▫️Interest rate sensitive sectors like banking and real estate ended in red, whereas IT,auto, oil and gas extended gains.

▫️The Ruppee closed 19 paise weaker at 74.98 against US dollar due to concerns over rising crude prices.

▫️Gold prices jumped and closed above ₹47k, after RBI’s policy decision.

▫️Oil prices is trading at record high with WTI Crude breaching $80 mark, as fuel demand rose.

▫️US Job data came weak, as a result the US stock markets closed slightly in red on Friday.

▫️Today morning US futures are trading marginally in red, while Asia is positive. SGX Nifty is indicating positive start for the Indian markets.


News Bulletin and Market Update: 01/10/2021

Market Update

▫️Indian markets continued to fall for 3rd straight day, as weak overseas sentiment weighed on the domestic markets.

▫️Sensex and Nifty plunged to 59,126 (-0.48%) and 17,618 (-0.43%).

▫️ Market Breadth was almost flat with advance decline of 906:901. However, midcap and small cap indices outperformed the benchmark and closed positive.

▫️ Volatility eased down yesterday, with VIX falling more than 2%.

▫️ Sectorwise PSU Bank, Pharma and Realty supported the markets, while IT, Auto, Metal and Media dragged the bourses.

▫️Ruppee fell by 9 paise to close at 5 week low of 74.23, due to risk averse sentiments and foreign fund outflows. The ruppee has fell by 59 paise in last 5 sessions.

▫️ Gold prices remained below 46,000 mark, due ro subdued global cues.

▫️Crude oil prices fell slightly after OPEC nations mulled to expand output to counter the increasing oil demand.

▫️US approved the bill to extend debt limit, easing concerns from US Govt shutdown. However, there was 3rd weekly rise in jobless claims that infused fears of slowing economic recovery.

▫️As a result, US indices ended negative with a fall of more than 1%. Overall US markets ended the September quarter with a fall of 4.3%, highest since March’20.

▫️US Futures are trading negative this morning, complimented by very weak opening of Asian markets. SGX Nifty is down by 176 points (or by 1.0%), reflecting tough Friday for the Indian markets.

News Bulletin

▫️ Govt. has raised domestic gas price by 62% to $2.9/mmBtu. Negative for power, tile and fertilizers. City gas prices may rise. (ONGC & RIL will gain)

▫️ India’s core industry growth touched 11.6% in August.

▫️Rise in crude oil and coal prices to hurt the manufacturers input costs.

▫️NCLT orders ZEE to hold a Board Meeting for conducting EGM as per request of its shareholders (Invesco).

▫️Fiscal Deficit touched only 31% of the FY22 target by August, reflecting increasing in government revenue.

▫️ Govt. has kept interest rates on PPF and NSC unchanged.

▫️ Home registrations in Mumbai jumped by 35%, in September (best in 10 years).

▫️ India’s current account balance recorded a surplus of $6.5 billion in June quarter.

▫️ Govt. tied up Microsoft to launch digital skills program, for development of youth.

▫️Amid rising crude oil prices, domestic petrol and diesel prices have reached all time high.

▫️India Australia to sign Free Trade Agreement by 2022 end.

▫️Airtel to invest ₹5,000 crore in data centre expansion, to boost its other sources of revenue.

▫️Maruti expects to cut production by 40% at 2 of its plant due to semiconductor shortage.

▫️ Sterling and Wilson Solar have repaid loans worth ₹740 crores ahead of the deadline.

▫️Adani Energy has procured 40MW solar power project.

▫️Tata Steel has divested its 100% stake in Singapore based NatSteel holdings for $172 million.

▫️RBI’s new auto debit rules kick in from today (recurring transactions would require customer approval).

▫️Non Food, bank credit grew 6.7% in August.

▫️Bank of India raised ₹1,800 crores.

▫️ Aditya Birla AMC IPO fully subscribed on Day 2.

▫️ India’s hotel industry is on swift recovery path, and will clock 50% of the pre pandemic revenue in FY22.

▫️MCX partnered with TCS for transformation of its trading platform.

This is for educational purposes only.

Market Update and News Bulletin: 30/09/2021

Market Update

▫️Indian markets continues their sell off on Wednesday, amid weak global markets, rising treasury yields and rising inflation concerns.

▫️Indian bond market is also seeing wide selling as there has been 5-15 bps increase in the bond yields.

▫️At the end of the day, Sensex and Nifty closed at 59,413 (-0.43%) and 17,711 (-0.21%).

▫️ Private Banks, Financial Services and Auto dragged down the market. Whereas, IT, Pharma, PSU Bank, Metal, Energy and Realty restricted the fall.

▫️Market breadth turned positive with advance decline ratio of 1019:766. Further midcap and smallcap indices also ended positive.

▫️Ruppee fell 8 paise to 74.14 against dollar (1 month low), due to month end dollar demand, rising treasury yields and stronger dollar overseas.

▫️ Oil prices fell marginally on Wednesday, after US oil inventories rose more than expected.

▫️ Gold prices continue to fall and reached 45,500 mark on Wednesday, as dollar is now trading at 1 year high.

▫️US market ended higher on Wednesday after the govt’s decision to lift the partial ban on debt limit.

▫️US futures are trading in green territory this morning, while Asia has opened mix. SGX Nifty is flat reflecting silent start for the Indian markets.

▫️Stocks in F&O ban: SUNTV.

News Roundup

▫️State telecom operator BSNL has asked govt. ₹37,000 crores to stay afloat.

▫️Piramal Enterprises has completed the insolvent DHFL takeover by paying its creditors ₹34,250 crores.

▫️ Govt. loan scheme of ₹4.5 lakh crore has been extended by 6 months to March’22.

▫️Indian Overseas Bank has been removed from RBI’s Prompt Corrective Action watchlist.

▫️Invesco moved to NCLT against Zee, for removal of CEO Punit Goenka.

▫️L&T is in discussion to merge its thermal power business with the Indian unit of Singapore-based Sembcorp Industries.

▫️ Govt. is considering to come up with PLI scheme for power equipment manufacturing.

▫️China is facing severe power crunch due to coal shortage and strict emission norms. Chinese govt. has asked railway firms and local coal bodies to smoothen coal supply.

▫️ Govt. to launch IPO of ECGC in FY23, and infuse ₹4,400 crore of capital support in the company. ECGC is the largest export credit insurance company of India.

▫️OPEC expects India’s oil demand to reach pre pandemic level in 2021.

▫️RIL backed appointment of Saudi Aramco’s non-executive chairman, as the Company’s independent director, while two institutional investors voted against it.

▫️ Persistent Systems to acquire US based Software Corporation International, Shree Partners and India based Shree Infosoft for a total of $60 million.

▫️ Spicejet has collaborated with Ease My Trip for holiday bookings.

▫️ Britannia joined hands with Accenture to boost its digital transformation.

▫️ Housing sales have more than doubled in 7 cities of India in the July-Sep quarter.

▫️NTPC (India’s largest power producer) to raise ₹18,000 crores via bonds.

▫️ Flipkart to deploy 2,000 EVs (2 and 3 wheelers) in its delivery fleet, ahead of festive season sale.

▫️HDFC Bank issued 4 lakh credit cards since August, after RBI lifted the ban.

▫️ Standard Life sold 5% stake in HDFC AMC for ₹3,060 crores.

▫️A whistle blower alleged that HDFC bank asked for fee from customers if they submit forged documents, instead of reporting it to authorities.

▫️Aditya Birla AMC IPO was subscribed 56% on Day 1.

▫️Induslnd Bank invoked pledged shares of McLeod Russell and acquired 4.79% stake in the company.

▫️US govt. to lift debt limit on govt funding to avoid the near term crisis.

▫️ Govt. may raise GST on garments and footwear from 5% to 12%.

▫️Coal India to increase coal supplies to the power sector.

▫️ Alstom India to bid for India’s 7 infra projects worth €1Billion.

▫️ Chinese troubled real estate company Evergrande to raise $1.5 bn by selling its stake in banking company.

▫️Vedanta may be in race to acquire Shipping Corporation of India from the government.

This post is for educational purposes only.

Market Update and News Roundup: 29/09/2021

Market Update

▫️Indian markets witnessed heavy sell-off on Tuesday, following weal global cues due to rise in bond yields and crude oil prices. Further, slowdown in China’s economy also turned foreign investors cautious.

▫️Sell off was also seen in bonds, as Indian government bond yield rose 9 bps in the past 3 days, tracking the rise in US treasury yields.

▫️Sensex and Nifty closed at 59,667 (-0.68%) and 10,748 (-0.60%).

▫️Power Sector, Energy, Steel, PSU Bank tried to support the markets but were outpaced by sell off in Realty, IT, Media and FMCG.

▫️Market Breadth was largely negative with advance decline ratio of 685:1135. Midcap and Small indices also fell in line with the benchmark.

▫️ Volatility index climbed by 2.66% to 18.53.

▫️Ruppee continued its free fall and closed 20 paise weak, at 74.04, tracking sell of in asian currencies and fall in domestic equities.

▫️The oil price rising streak finally ended on Tuesday, with the Brent Crude price falling before $78 mark, as investors looked for profit booking.

▫️Gold prices continued to fall, and ended below the 46k mark due to higher bond yields.

▫️US treasuries rose to 1.5%, first time since June, on expectations of sooner then expected rate hikes. Further, US Consumer Confidence index came lower at 109.3 than expectation of 115.

▫️As a result, US markets experienced large sell of with Dow and S&P500 falling 1.6% and 2.0%.

▫️Today morning US futures are trading positive. Whereas Asian markets have opened in deep red territory. Lower SGX Nifty is also indicating a lackluster start for the Indian Markets.

▫️Stocks in F&O ban: SUNTV, SAIL, IDEA and ZEEL.

News Roundup

▫️ Govt. is actively looking to privatise non-strategic PSUs (focus on SAIL, NBCC, Madras Fertilizer and National Fertilizer).

▫️ State Govt’s indebtedness to remain high, with debt to GDP ratio estimate of 33% in FY22.

▫️ Business Redemption index moved to record high of 105.0 during September, thanks to surge in mobility in Hyderabad and Pune.

▫️Future Group may hold shareholder meet, to seek approval for sale of assets to RIL.

▫️India has one of the highest fintech adoption rate globally with score of 87%, compared to global average of 64%.

▫️India has scrapped of 22,000 compliances, decriminalised 103 corporate offences and removed 327 redundant provision, to promote ease of doing business.

▫️ Govt. has notified that only Indian registered companies can opt for the ₹10k crores textile PLI scheme.

▫️ American airlines and Indigo signed a one way codeshare contract under which the foreign operator can sell seats on the Indian carrier.

▫️ Godrej Industries raised ₹750 crores via bonds.

▫️Eveready Industries is looking to expand, and add products under the Eveready brand.

▫️UP Govt. to promote wine production and will aid in setting up dozen of wine production units.

▫️In a blow to Adani Gas, Supreme Court rejected Adani’s plea to distribute gas in districts of Gujarat.

▫️US trade deficit increased by 0.9%, while its consumer confidence hit 7 month low.

▫️US Treasury Secretary Janet Yellen, has warned the US govt. that her department will run out of cash by Oct 18, and they will be unable to honor US govt. obligations. This led to sharpe rise in US yields to 1.5%.

▫️Japan lifted Covid-19 emergency, and is now looking to boost the economy.

▫️Muthoot Finance joined hands with a tech company to launch AI assistant.

▫️Indian Bank partnered with TN govt. for performing the state’s treasury activities.

▫️MSCI Index can go for composition change which can attract $ 1 billion in Indian markets, potential stocks that can be included are: Zomato, Mphasis, Mindtree, IRCTC, SRF and Godrej Properties.

▫️ Whirlpool India to buy additional stake in Elica PB India for $57 million.

This post is for educational purposes only.

Market Analysis and News Update: 23/09/2021

Market Update

▫️Indian markets traded in a narrow range yesterday, ahead of US Fed Policy Outcome.

▫️Sensex and Nifty ended flat at 58,927 (-0.13%) and 17,546.55 (-0.09%).

▫️ Sectorwise, Media and Realty outperformed, while financial services and private banks suffered.

▫️Overall, market breadth was positive with Midcap and Smallcap indices climbing 1.7% and 1.4%. Advance: Decline ratio of 1244:571, reflected bullish sentiments.

▫️ Ruppee fell 26 paise to close at 73.87, due to stronger dollar overseas.

▫️Oil prices rallied, as US oil inventories fell to their lowest level in 3 years.

▫️Gold prices remained in narrow range amid bond tapering program speculations.

▫️US Markets closed positive (+ve), after Fed policy outcome statement to reduce its monthly bond purchase program soon, and easing market tensions regarding Evergrande fall.

▫️This morning US futures are trading with a positive bias. Asia is trading mixed, with SGX Nifty is indicating positively flat opening for the Indian markets.

News Bulletin

▫️US Fed Meet ended yesterday. Fed announced it would reduce its monthly bond purchases as soon as November and interest rates could be raised more quickly (not this year atleast). However, Fed assured that their Accommodative stance would continue to support the market. (Overall, no surprises, US Markets reacted positively to the statement)

▫️In yesterday’s early hourse, Zee Entertainment announced its merger plan with Sony network, to create largest entertainment network in India. (Industry will consolidate more as OTT platforms gain market share)

▫️Voda Idea CEO and MD announced that the company will survive and will raise funds soon.

▫️ Children above the age 12 yeara may start receiving the jabs from next month.

▫️India’s crude oil production fell 2.3% in Aug, while Gas production rose more than 20%, because of RIL boosted gas production capacity.

▫️ Govt to raise fertilizer subsidy by another 25,000 crores (UPL in focus).

▫️Hero can end petrol 2 wheeler sales by 2027, and is increasing EV capacity at its manufacturing plant.

▫️FDI equity inflows rose 112% in Apr-July.

▫️ Property registrations in Mumbai are highly positive, and can break the 10 year record. (Real estate companies in focus)

▫️ Evergrande has negotiated the interest payment due today. (Confusing statement but atleast it seems the default risk is now off the table).

▫️ Govt. may block Chinese investment in LIC IPO.

▫️ Aluminum industry is facing coal shortage crisis, will lead to higher input costs.

▫️Mphasis to acquire US Based Blink for ₹694.3 crores.

▫️Infy announced collaboration with Amazon Web Services for cloud technology (recently TCS announced cloud partnership with Google)

▫️Mindtree plans expansion in Europe and APAC regions.

▫️ Chinese city with a 10 million population went into lockdown after covid case detection.

▫️BOI to raise ₹1,800 crores via bonds.

▫️Ashok Leyland partnered with Federal Bank for vehicle financing.

▫️Parad Defence IPO subscribed by 40 times on Day 2.

▫️ India’s active covid cases lowest since Mar 2020.

▫️Indian oil to establish refinery cum petrochemical unit in Tamil Nadu worth ₹31,580 crores.

▫️Natural Rubber prices slipped 5-10% last month (+ve for tyre companies)

This is for educational purposes only.

Market Update and News Bulletin: 22/09/21

Market Update

▫️Indian markets witnesses a mixed session yesterday, and markets recovered sharply in the second half after fears of contagion effect from the fall out of Evergrande eased.

▫️Sensex and Nifty closed positive at 59,005 (+0.88%) and 17,562 (+0.95%).

▫️ Volatility Index VIX fell by 5.55% to 16.52, reflection increased investor confidence.

▫️Real Estate, IT, Metals, FMCG and Pharma shares fared well, while PSU Bank and Auto extended losses.

▫️ Market breadth remained weak as small and mid cap indices lagged the frontline benchmark. Further, Advance Decline ratio was also Bearish (862:942).

▫️ Ruppee recovered 13 paise to close at 73.61, amid stock rally and weak dollar ahead of Fed’s meet.

▫️Oil prices rose marginally after Monday’s fall, on demand outlook partly offset by supply side issues.

▫️ Gold inched up by ₹231 to ₹46,531, on risk averse stance by investors ahead of US Fed Policy Outcome.

▫️US markets ended slightly negative on Tuesday, amid global slowdown fears due to problems in the Chinese economy.

▫️This morning US futures are trading positive. Asia is mixed, as Chinese benchmarks are trading lower. However, SGX Nifty is indicating a positive start for the Indian markets.

▫️Indian Markets may remain volatile until tomorrow, and will take fresh stance after the Fed’s policy outcome.

▫️Stocks in F&O ban: IDEA, IRCTC, IBULHSGFIN, PNB and SUNTV.

News Bulletin

▫️ Evergrande Chairman eased out tension and affirmed that the Company will fulfill its responsibilities towards property buyers, investors, partners and financial institutions. The Company has $83 million interest coupon due on Thursday, and it will be watched closely if it is able to pay the same.

▫️Stricter regulations to be imposed on e-comm industry , draws internal criticism from certain sections of the govt itself.

▫️Adani Group to invest $20 billion in renewable energy in next 10 years.

▫️India will not buy foreign vaccines: Moderna and Pfizer.

▫️Tata Motors to hike Commercial Vehicle prices by 2%, due to rising input costs.

▫️ RIL may acquire stressed polyester manufacturer JBF Industries.

▫️Torrent Power to buy 156 MW wind energy plant from CESC for ₹790 crores.

▫️ Business Resumption index remained above pre pandemic level in September (+ve econony).

▫️Loan guarantee scheme launched by the govt. may be extended by 6 months to March 22, to give full advantage to the beneficiaries.

▫️Agri exports jumped 22% in Apr-Aug period.

▫️FPI investment in India in September has been highest so far in FY22.

▫️ Govt to cancel the allotment of Jharkhand coal mine to Adani Power as it didn’t operationalise the same on time.

▫️Kharif food grain output estimated at record 150.5 tonne this year.

▫️Spread of coronavirus in India has slowed as the R value (measure of spread) fell below 1.

▫️Maruti to continue to work and sell fuel efficient cars, as it is the most demanded automobile in the country.

▫️ Godrej Industry fo raise ₹750 crore via issuance of bonds.

▫️L&T bagged 2 significant orders from GAIL India and Air Products Middle East.

▫️ Flipkart to run Big Billion Day Sale from Oct 7-12.

▫️ Spice Jet to raise ₹25 billion by share sales to improve financial condition.

▫️ Global Firm Deloitte, marked that India is now witnessing a consumption revival.

▫️US current account deficit is at 14 years high (may see some pressure on dollar).

▫️India Bull Housing Finance raised ₹808 crores via bonds.

▫️BSE added 1 crore investor accounts in just 107 days.

▫️ Kotak Mahindra Bank announced its entry into healthcare lending.

▫️ HDFC Bank plans to double the exposure to retail loans in couple of years. It plans to raise ₹5,000 crore in infra bonds.

▫️Paras Defence IPO subscribed 16.57 times on first day.

▫️Tata Power to raise $750 million for renewable energy.

▫️TATA-Airbus to sign a mega ₹22,000 deal for military aircraft manufacturing (game changer: privatisation in defence)

▫️ Govt has asked ministries to speed up capital expenditure and adopt technology, and ensure that support is reached to everyone.

This is for educational purposes only.

Daily Dose of Market and News: 17/09/21

Market Update

▫️ Indian markets extended the rally, on account of support measures announced by the government for various sectors.

▫️Sensex and Nifty closed at 59,141 (+0.71%) and 17,629 (0.69%).

▫️Banking Sector was show stealer which jumped on expectations of Finance Minister’s announcement of government funded Bad Bank. Nifty Bank and Nifty PSU Bank surged 2.22% and 5.43%. Whereas, IT and Media stocks under performed.

▫️Broader Markets lagged the benchmarks as Midcap and Smallcap indices rose only marginally, and Advance Decline ratio was in favour of bears (841:969).

▫️Rupee ended the day slightly weak by 2 paise and closed at ₹73.52 against dollar, amid strength in dollar against global currencies.

▫️Oil prices fell on Thursday finally ending its positive streak, as US production gradually returns back to normal and strong dollar.

▫️Gold prices fell significantly (-1.72%) below 47k mark, due to rally in US Bond yields and stellar performance of domestic equities.

▫️All eyes are on US Fed meeting next week and US market is linking all economic data to the likelihood of bond tapering program.

▫️ Yesterday US posted better than expected retail sales data, which according to investors was negative for the market as it may force Fed to begin tapering program sooner. Hence, US markets closed negative yesterday.

▫️This morning US indices continue to trade in red. Asia is also trading negative, in anticipation of Fed policy outcome and weak Chinese economy. Hong Kong’s index is trading at year’s lowest level. SGX Nifty is also suggesting a quiet start for Indian markets.

News Bulletin

▫️ Finance Minister yesterday announced the specifics of Bad Bank, which will resolve NPAs of about ₹2 lakh crore. To provide sovereign backing to the entity, govt. will guarantee ₹31,000 crore worth of securities issued by the bad bank for fund raising.

▫️ Govt has invoked 3 way pact to recover long standing dues from state run power companies. RBI deducted ₹5,100 crores from accounts of 3 states for their power dues. (Very tough stance by govt. to benefit Coal India and NTPC)

▫️Bharti Airtel Chairman Mittal spoke to Vodafone Inc’s CEO Nick Read, and urged him to reinvest in Vodafone India and recover lost ground, as the government has provided the required support.

▫️ Airtel will use the moratorium and invest the money saved in 5G.

▫️Telecom Dispute Appellate stayed the order on Telcom Department’s demand for ₹1,376 from Airtel over unpaid dues.

▫️ZEE Entertainment BOD to back its two directors against whom shareholders have displayed outburst.

▫️₹6k crores investment have already been pledged by 52 companies under PLI scheme for white goods.

▫️Ola sold ₹600 crores e-scooter on Day 1. (Big Industry Disruption)

▫️India’s GDP to grow by 7.2% in 2021, despite the horrific 2nd wave.

▫️Anti Dumping duties of certain steel products may be extended to help the domestic steel manufacturers.

▫️India became second largest tech hub for Amazon globally after home country US.

▫️Hero Moto to hike prices for its products from next week as input cost rises.

▫️TVS Motor enters into Europe with acquisition of Swiss e bike maker EGO.

▫️After a slump in Chinese markets, there are no Chinese firms left in the world’s top 10 companies list by Market Cap.

▫️RBI Spokesperson said that the Central Bank will remain in liquidity absorption mode to suck excess liquidity out of the banking system.

▫️Malabar Gold will invest ₹750 crores to set up factories in Telangana.

▫️Kotak Mahindra Bank bought vehicle finance portfolio of Volkswagen’s financing arm.

▫️ NBFC raised heavy funds via commerical papers between Apr-Aug to fund HNI demand for investment in IPOs.

▫️SBI and BOB announced attractive offers for home loan.

▫️Over 20% of Indian adults are fully vaccinated.

▫️ Domestic Air Traffic volume improved significantly as 6.7 million passengers flew in August compared to 5.0 million in July (+ve for airlines).

This is for educational purposes only.

Is Gold rally likely to fizzle out soon?

2020 has been a painful year for all of us till now (no need to mention the reason). However, amidst all the difficulties there has been a ray of sunshine especially for the stock markets enthusiasts, be it, investors or fund managers (of course those who could catch up to the opportunity). i.e. the prolific rally in two asset classes: Equities & Gold. Both these asset classes have delivered handsome returns to investors in a timeframe of fewer than 4 months; ~20 per cent for GOLD and ~30 per cent for EQUITY (Nifty50).

In this article, we will focus on the current and future prospects of GOLD as an investment avenue.
Firstly, let us understand why GOLD has had a dream run because many of us might be wondering that there has been a massive demand destruction on the discretionary side owing to the COVID pandemic, and as such who on earth is going to buy jewellery or any other gold item. Keeping this in mind, prices of GOLD should have been on a southward journey? Right?
NO. To your surprise, three days back GOLD touched an all-time high of ₹51,500/10gm in the spot market and is in close proximity to reach all-time high levels internationally.

The following factors were behind the GOLD’s stellar rally:
Linkage to International Prices – Internationally, gold prices are on the rise because of its tag of “safe haven” in difficult times. And since domestic prices have a linkage with international prices, they have risen too
Accumulation by fund houses across countries – At a time when interest rates across countries are abysmally low or negative in some case coupled with a bleak economic outlook that has cast a dark shadow on companies’ prospects, it makes sense for fund houses to park their money elsewhere for generating returns. Fund houses across the US and Europe have followed suit by piling up gold during these tough times resulting in 18% surge in demand for the precious metal. The behaviour has almost been an encore of what they did in 2009 after the global financial crisis.

Now the moot question – How long will the gold rally last?
In the short term, there are a host of events which can keep the prices of gold buoyant and might even take it to a fresh all-time high; rising Coronavirus infections with a possibility of a second wave, geopolitical tensions between US-China, China-India and US Presidential elections in November to name a few.

But does this mean we should stock up the yellow metal for a holding period ranging from 3-5 years?
Let’s take the example of the year 2011 – The year in which gold reached an all-time high of $1920/oz and ₹26,400/10gm, both internationally and domestically, owing to economic issues around the world.
But what happened after that? India’s GDP growth recovered from 5.24 per cent in 2011 to 8.17 per cent in 2016, while gold prices remained almost flat during the period (₹28,623.50/10gm in 2016).

We all are familiar with this quote: “This too shall pass”. So, the COVID-2019 pandemic will pass too. It can’t stay here for years or else we will have to live with it.
Recently, there has been a stupendous advancement in R&D particularly for the development of a vaccine. What if the vaccine comes way before than projected? Will gold still shine?
Secondly, the geopolitical tensions and US presidential elections, can’t keep gold afloat at all-time high levels for too long.
All of us are praying for a quick arrival of vaccine and COVID-2019 to go. If things materialize, then the so-called “safe haven” might lose its sheen similarly like it did after 2011. We believe that although there are enough triggers for some more upside in GOLD in the short term, for the long term it would be prudent for investors to wait for a correction and then ride on the GOLD-RUN. Till then enjoy any short term investment opportunity as far as gold is concerned.

Keep sharing the rare #rare4share, See you next time soon. Till then take care and stay safe!