Equities, Gold Recover, Housing Gets Lucrative Again
Ninad RamdasiCategories: DSIJ_Magazine_Web, DSIJMagazine_App, MF - Expert Guest Column, MF - Expert Guest Column, Mutual Fund
Investments are aimed at maximum returns and yield those when chosen wisely. While there are numerous options available today, gold, equities, and residential real estate have withstood the test of time.
Gold remained a favourite investment for Indian households due to its liquidity and investment size flexibility. Equities are highly volatile and easily impacted by social, political, and economic upheavals. Real estate, always considered a long-term investment, gives portfolio stability and appreciates with time. The physical nature of the asset, unlike stocks, also ensures limited wealth erosion.
As the COVID-19 pandemic beset the world towards the end of 2019, global stock markets buckled and crumbled under unprecedented business uncertainties. India, an integral part of the global economy, also saw rough times - the BSE Sensex declined sharply by 29 per cent between December 2019 and March 2020.
Gold, considered a ‘safe haven’ investment in times of turbulence, went northward and appreciated by 4 per cent. Residential real estate prices in India remained stable as there were uncertainties about the execution, development, and sales of the projects. All sectors, including real estate, were challenged on how to navigate the tempest.
The 2nd wave was more toxic in India, creating an acute healthcare crisis that claimed many lives and led to the reenforcement of lockdowns. However, all asset classes stayed steady on the back of business continuity learnings from the 1st wave.
The stock markets exhibited resilience and investors again became active as many scrips were available at attractive valuations. During this period, Sensex regained a growth trajectory after a minor correction of 1 per cent in April 2021 compared to the previous month. Gold, though lower than the previous peak, appreciated again, while residential real estate remained stable.
The Sensex has recorded the highest appreciation in value and volume since the pandemic receded. The 3rd wave early this year caused a minor aberration and was short-lived. Gold continued regaining lost ground and would have remained in a stronger position had it not been for the global economic turmoil, geopolitical tensions, and supply chain issues.
In all this turmoil, residential real estate has exhibited exceptional resilience and is now on a growth path. The weighted average price across the top seven cities has appreciated. While price is a function of supply and demand, the favourable change of sales exceeding supply continued even during the pandemic. Analysis shows that the available housing inventory is on a steady decline.
All assets have exceeded their pre-pandemic levels. Compared to the September 2019 levels, the BSE Sensex has recorded an appreciation of 52 per cent, gold prices have increased by 34 per cent, and residential real estate by 9 per cent. These readings indicate that the worst impact of the pandemic is behind us. Economic growth, despite global uncertainties and the headwind of rising inflation, is likely to be robust.
"The COVID-19 pandemic reaffirmed the necessity of owning homes since it provides more than mere accommodation – it also gives security in times of generalized financial instability,” says Prashant Thakur. He further, “Gold and stocks, on the other hand, are volatile and subject to market risks."
Currently, real estate activities are in full swing and both demand and supply are increasing rapidly. As residential launches increased by 76 per cent and sales by 61 per cent in H1 2022 compared to the pre-pandemic levels of H2 2019, housing is expected to have witnessed strong traction during the festive season, which could result in further price appreciation.
