Gold, real estate lose their best-seller tag
Mutual funds, fixed deposits are investors’ new darlings; show tremendous growth
August 23, 2015:
There’s a big sale out there in the property market with builders going all out to woo buyers, but, there are few takers.
Gold, the once hot investment, is also not seeing many buyers. Goldman Sach’s gold BeES — the largest gold ETF in the country — is trading at a 1.5 per cent discount to its net asset value (NAV).
The lacklustre returns from gold and real estate in recent times are making household savings shift from these physical assets.
This trend is favourable to financial assets such as equity mutual funds and bank deposits.
Real estate demand in many prime localities, including the National Capital Region and Mumbai, has crashed.
In NCR, between January and June this year 14,250 homes were sold; down from 28,500 in the first half of 2014 and 45,302 in the same period of 2013, reports real estate consultancy Knight Frank.
Samantak Das, Chief Economist and National Director Research at Knight Frank, says that speculators who invest for six months-to-a-year have left the market as exits are getting difficult.
Demand for physical gold bars and coins has also fallen after the Reserve Bank of India lifted the import ban on gold in February. In the June quarter, the country’s demand for gold bars was 36.5 tonnes, down from 52.3 tonnes in the same period last year, according to the World Gold Council. This is much lower than 149 tonnes — the highest ever — consumed in the June quarter of 2013.
The same is the case with gold ETFs too. Gold backed exchange traded funds in the domestic market saw holdings quadruple to 35 tonnes between 2009 and 2012. But it is now only about 25 tonnes.
Investors have a tendency to shy away from assets that do not deliver sound returns. Gold prices are down about 17 per cent in the last two years (in rupee terms). The average price of property is flat or lower in most cities. For instance, a square feet of land in NCR is ₹4,500 now, almost flat since 2013. But between 2012 and 2013, prices in the region had shot up 12-15 per cent.
As a result, household savings are perhaps going into equities and bank deposits.
Since January, equity mutual funds have reported net inflows of about ₹56,000 crore. In 2014, equity MFs saw a net inflow of ₹49,000 crore after a net outflow of ₹8,700 crore in 2013.
Similarly, bank fixed deposits have also seen a strong inflow into their term deposits. Data with RBI show that banks saw an inflow of ₹3.49 trillion so far this fiscal, up over 55 per cent from the same period last year.