Gold, property or stocks: your Diwali investment options

As a celebration of the Hindu goddess Lakshmi, Diwali is intrinsically linked with wealth and investment, which the deity is associated with. Accordingly, the festival period is considered an auspicious time to put some money away for the
future, traditionally in gold and precious metals, but more recently in real estate and stocks. But would you be making the right decision? Here is the outlook on three traditional investment options.

Gold

Traditionally considered a safe haven, gold has recently been seeing something of a bear run, and is now moving in line with the US Federal Reserve’s stance on interest rates.
As of late October, gold rallied 5.2 per cent over September, following weak US jobs data and expectations of low interest rates.
However, the metal dropped to five-year lows in July and has yet to recover.
According to the World Gold Council, demand for jewellery has dropped in China, as the economy slows, in India, where extreme weather and currency weakness have dented purchasing power, and in the Middle East, on account of lower oil prices and an increase in VAT. In fact, demand is only up in the US, which saw a 2 per cent year-over-year increase thanks to lower prices.
The outlook is muted and even pessimistic. “Slowing growth in emerging markets can’t help demand; interest rates are a constant threat,” Adam Laird, an investment manager at Hargreaves Lansdown, told Reuters.
However, for those already holding gold, the bright spot is the Indian government’s launch of a gold monetisation scheme, expected just in time for Diwali. As per the plan, consumers holding at least 30g of gold whose purity is above 995 can deposit it with banks in return for interest.
“Gold can be converted from dead money to an economic force. To leave gold lying as dead money is behaviour not in sync with the modern times,” Indian Prime Minster Narendra Modi said on his monthly radio show, Mann ki Baat.

Property

Real estate is a favoured investment vehicle around Diwali, and while the Indian market sector may just about be beginning to show signs of a revival, Dubai is attracting buyers.
“According to Dubai government, Indians were the most prolific foreign investors in the first half of 2015, with 3,017 transactions worth more than $2 billion [Dh7.3 billion],” Sunil Jaiswal, President of Sumansa Exhibitions, told PTI. Jaiswal’s company is the organiser of the property show in India and the UAE. According to the data, Indians top the foreign property investment chart, a position they have consistently maintained for years, Jaiswal said, adding that  the lower property rates in Dubai compared to certain cities in India was favourable for investors.
In India, the improving economy following last year’s general election has seen the real-estate sector warm up to the possibility of a new investment cycle, says Anuj Puri, Chairman and Country Head of JLL India. “On the other hand, barring the US, the global economy continues to remain vulnerable to uncertainties, and this makes India’s position more lucrative. The ruling government’s action in addressing concerns of stakeholders through reforms (in the Land Acquisition Act, the Real Estate Regulatory bill, relaxation of FDI rules, etc.) is helping sentiments in the realty space,” he says.
A medium-term cycle could be on
the horizon.

Equities

India’s stock market traditionally remains open for about an hour on Diwali day for investor trading, so the New Year may begin on an auspicious note. Overall, though, equities may be a sound investment option. “The current global environment of modest growth, accompanied by falling commodity prices and benign liquidity are favourable for India as an investment destination, particularly in relative terms,” JP Morgan analysts Bharat Iyer, Bijay Kumar and Adrian Mowat said in a recent India equity strategy report. “Our base case remains for Indian equities to deliver returns of about 10-12 per cent through to the end of the fiscal year driven mainly by earnings growth forecast.”
Others are chiming in agreement. Global credit ratings agency Moody’s last month (OCTOBER) reaffirmed the country’s credit ratings at Baa3, pointing out that it is less exposed to external economic shocks thanks to resilient growth and policy reforms.
Following three central bank rate cuts this year, the IMF expects India’s GDP to grow at 7.3-7.5 per cent, the fastest rate in the world, over the next 24 months. This also made India the world’s top destination for foreign investment in the first half of this year, with inflows of $30.8 billion, according to E&Y.
New IPOs have been lined up, with a nearly fivefold rise in share offerings so far this year to $1 billion, the best in three years. Coffee Day Enterprises, the nation’s largest café chain, was oversubscribed 1.8 times over last month, with similar performance expected for InterGlobe Aviation, owners of IndiGo airlines and fragrance maker SH Kelkar and Co.
“The probability of the market returns being better in [the Hindu year] Samvat 2072 than the previous year are high, given the subdued level of investor interest at present,” Saravana Kumar, CIO, LIC Nomura MF, said in an interview with the Economic Times newspaper. “Having said that, we advise investors to keep their long-term asset allocation in mind. Now with economic data turning encouraging, investors should participate in India’s growth through well-diversified equity investing.”