A slump at Dalal Street, rising inflation and various other factors prompted investors to start thinking about alternative investment avenues.
Though gold exchange traded fund (ETF), a demat form for investment or e-paper gold, is relatively a new concept, it saw a whopping rise of 258% in investment in 2010 compared to 2009. At a time when the overall volume of BSE and NSE turnover fell by 5% in 2010, investment in gold ETF rose from Rs482 crore in 2009 to Rs1,727 crore in 2010.
Slump at Dalal Street, rising inflation and various other factors prompted investors to start thinking about alternative investment avenues.
Despite rising gold prices, investments in gold increased mainly due to the returns earned on yellow metal. “Gold ETF provides investors an option to invest in gold in smaller denominations as compared to gold jewellery which demands higher investment. Also, the returns are same under both the options,” said Biren Vakil, a gold expert.
Also, experts feel that the modern lifestyle does not allow people to buy and store gold jewellery easily though they still want to remain attached to gold. So they choose the option of gold ETF from which they get not only good returns but also the
satisfaction of investing in yellow metal.
In India, people love to invest in gold on auspicious occasions like birth and wedding. So with the launch of options like gold ETF, a gradual shift is being seen towards ETFs from physical investment.
“The rising inflation, along with geopolitical tension, has made investors opt for asset allocation resulting in increase in gold investment. Most investors consider gold as a hedge against inflation. Also, most investors have reduced their exposure to equity after volatility in market,” said Nilesh Kotak, MD,
Dhanvarsha Fincap Pvt Ltd. Sharing the same sentiments, Vakil said: “The investment seen in gold ETF in 2010 is more of fresh investment and it includes investors who have burnt their fingers in equity and shifted to other avenues like bullion.” Renisha Chainani, deputy manager (commodities research), Anagram Capital Ltd, said: “I feel that gold being a global commodity has been giving good returns in the past 10 years, which is incidental for increase in investment in gold ETF.
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