Nifty vs Sensex vs gold:
After giving zero return in first two months of the current year (CY) 2023, key benchmark indices of the Indian stock market — NSE Nifty and BSE Sensex — witnessed strong rally in last four months that helped both indices to touch record high on the last session of CY2023. In first six months of CY23, Nifty has delivered 5.83 per cent return whereas 30-stock index Sensex surged to the tune of 6.32 per cent in this time. However, gold is not a laggard in terms of giving return to its long term investors. In January to June 2023 time, gold has given 5.73 per cent return to its investors.
Speaking on the return given by Sensex, Nifty and gold in first six months of 2023, Anuj Gupta, Vice President — research at IIFL Securities said, “Both Nifty and Sensex ended lower in first two months due to concerns of economic slowdown in the US and other strong economies. In this period, we saw gold emerging as a haven for investors as they were relocating their money from equity and other asset class to gold and bonds. But, ease in pressure on the US economy and US Fed’s interest rate pause led to trend reversal in Indian markets. However, gold remained investors’ favorite till end of May 2023. However, profit booking had triggered in mid of May.”
How gold keep on attracting investors?
On how gold remained in reckoning despite stock market rally in India, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “Even though Nifty and Sensex touched record high during last session of H1-CY23, gold has also been a strong performer in the first half of 2023, with prices up around 5.73 per cent year-to-date. Gold prices have remained buoyant amid the concerns surrounding the banking crisis in the US, hopes of an interest rate cut by the US Fed towards the end of the year, weakness in the greenback, robust central banks buying in the Q1 CY23, concerns of a slowdown in growth momentum and positive global gold ETF flows of around $1bln till May 2023. However, prices have corrected since the second half of May amid a slew of headwinds-concerns of US debt ceiling subsiding, receding inflationary pressures, sizeable net selling by central banks’ in April, and the rebound in the dollar index from multi-month lows at the expense of gold.”
Trend reversal at Indian stock market
“The major turnaround in Nifty and Sensex took place in the month of April as both DIIs and FIIs became net buyers had helped Nifty register around 4.1 per cent rise. This rise in key benchmark indices in the month of April triggered buying interest in broad markets as small-cap and mid-cap indices were the first to touch life-time highs. After the robust rebound, Nifty and Sensex extended this rally in May and June as well. Nifty logged 2.60 per cent return in the month of May while in June 2023, 50-stock index registered 3.50 per cent rise,” said Anuj Gupta of IIFL Securities.
How Sensex, Nifty and gold performed in H-1CY23
On factors that led to trend reversal on Dalal Street, Sugandha Sachdeva said, “The Nifty 50 index and Sensex witnessed a scorching rally and surged to new all-time highs in the first half of 2023. This rally has been driven by a number of factors, including robust foreign investor flows, upbeat US economic data, receding inflationary pressures, subdued crude oil prices, steady corporate earnings, and a revival of the monsoon. FIIs have pumped around $11 billion into the Indian stock market in the past four months. Further, broad-based participation from almost all sectors has contributed to the Nifty’s roaring upsurge.”
Giving credit to HDFC Bank HDFC merger for the last minute push in Indian markets ahead of the end of first half of 2023, Sugandha Sachdeva said, “Markets also received a nudge from the optimism surrounding the HDFC-HDFC Bank merger. This merger would create the world’s fourth-largest bank by market capitalization. The merger is seen as a positive sign for the Indian economy, as it would create a stronger and more efficient financial institution,” adding, “Furthermore, Prime Minister Narendra Modi’s recent visit to the US has also brought about exuberance in the markets. His visit is likely to strengthen bilateral ties between the two countries, and as a slew of strategic deals were signed, investor sentiment improved back home.”
On which asset class may outperform others in the next half of 2023, Sugandha Sachdeva said, “It would be difficult to assess, which asset class will outperform in the second half of the year. Ultimately, the performance of both asset classes will depend on several factors, including the global economic outlook, interest rates trajectory, and geopolitical developments.”
