Value Add is the way forward

There are decadal changes that are happening in economics currently. Rather I would say we are witnessing a confluence of mammoth changes happening. These are happening because certain behaviours, certain things, certain statistics reached their extreme and now reversing.

This reversal however is not that simple it implies that we are reversing from a world that had accepted certain things as their way of life and are changing (for good or bad time will tell). One of the aspects I wanted to cover in this writeup the value of money and its impact on commercial aspects.

For last 100 Year we have witnessed a rise of West and along with it we also have witnessed the ideologies linked to west accepted by every being. It began with aspiring to work in west, travelling to Europe as aspiration to studying in West. Over the years these ideologies have become our way of living as we look upon some of the western education institutions with lot of respect. In financial world capitalism took far more lead as compared to communism and it is the preferred way most of the countries chose in last 50 years when they had an option. I have no problems with these as long as they make our living easier.  

As the world now is closer to USD 100 odd trillion GDP the fundamental question of US dollar as a preferred currency is standing. The USD which was considered as a rich currency and made world believe that it is the only one which is a global currency the thought has started seeing cracks.

USD brought it with the deflation for world, East lost pricing power, made the resource poor economies rich and resource rich economies poor, This brought in lot of thoughts like – Asset light living, focus on quality spending than on savings, the young generation moved towards leasing than owning, Made the desktop work more valuable than ground work – All this happened only and only because Value of Money has gone down.

Value of money went down as US kept on printing dollars and kept pushing interest rates low. Over last 40 years this according to me has created a sharp behavioural shifts. I feel as this shield goes down slowly a bare truth is about to come in front of our eyes.

According to me soon we are going to witness – “ Earning Money is not so Easy”. For every penny that individual is going to pay the value add is going to be of utmost importance. Soon everyone is going to ask “ Why am I Paying, What am I Paying for and What is the outcome of this exercise”.

I feel the real economy has just made a cameo but it is about to launch in the form of movie with multiple parts. The virtual economy will have to make lot of efforts to justify its existence as the outcomes are intangible. The tangibles which were losing value will get more value and intangibles will need to make value add efforts.

I can write about my industry of investments – We have already started to witness the pricing pressure and transparency norms put on the manufacturers. Investors are already looking at reducing costs and actually seeking value for every penny paid. I believe the platforms will perpetually have to Focus on improving execution at competitive costs and advisors will perpetually have to look for Value Add. The Easy Money Era is over and it applies to us as well.

Reading – Thinking – Executing all will be important. I believe the era or Working Hard with diligence has begun and it will keep evolving. One will have to constantly think of Justifying their existence. Lot of people misunderstand that advisors can justify their costs only by generating returns but that is the job of money manager. Advisors job is to customise solution and help manage wealth within the constraints of  investor and periodically keep tracking the navigation. I think the investment house will have to rethink their strategy before someone else does.

In the end these are again interesting times. As the Value Of dollar goes down, it will have lot of consequence… the natural impact of it is … it increases the value of everything else.… great time for resource rich economies have begun. Lets see how we navigate with time.

Brexit or No Brexit

23.06.2016 –

Nifty - 8264

Brexit or no Brexit

I found it prudent to enter into Brexit event with zero position. However I have been trying to find out a strategy for Brexit since Monday. More I thought about it and tried  to take some views from people in London but I felt everyone is confused about the outcome. I was very much sure that the Britain will not move out of Eurozone but as people on the ground will be voting I got little concerned that there is a possibility of Brexit.

As far as markets are concerned Brexit thing has been going on since last three weeks and markets have been holding high and it seems Brexit is not factored in. In fact Europe has been rising since last three days. More or less everyone is certain about the Britain staying in the Europe. My assessment was also that this will be non event as far as Indian Markets are concerned.

Indian markets have held on to 8200 levels quiet well. In fact 8080 zone has worked as super support for markets. Markets according to me are in super higher top higher bottom structure and we are in a structural bull rally. I feel very high levels are coming into Indian equity markets and any sharp fall will be used by Institutional investors to lap up the market. I feel we are certainly cheap till we reach previous peak and time correction of two years will already have happened if we reach to previous peak by January 2017.

I am expecting a fall of 4 to 5% in markets in next 20 -25 days from hereon, but within this period lot of certainty will prevail over the monsoon which according to me a sole factor which will trigger lot of positive news right from interest rate cut to earnings improvement.

Nevertheless this Brexit event according to me will be a buying opportunity. I feel whether Brexit happens or not the Rajan effect will be there. On Monday post Rajan Exit FIIs sold Rs 500 crores but DIIs came into action and bought a big chunk of Rs 750 crores. I feel the Rajan effect will be there its just that it wont be called Rajan effect much to the liking of the government.   

The Monsoon seems to be advancing as desired and will give better imact I guess.

Brexit or No Brexit we are in for a good rally I feel. But wait for a correction most prudent for traders.

This Market is Not Falling!!!

This market is not falling!!!

Equity markets saw continuous run up post a very shallow correction in October. From a low of 25,910 on Sensex on 17 October, it took barely 15 days to reach a level of 28,000. This rally hardly gave an opportunity for many investors waiting for meaning full correction on index. I feel we are again sitting on a cusp – cusp of unbelievable rally. I am trying to reason it out in a simple way.  Well, these are my guesses researched on the basis of past market behaviors and the way this rally has been shaping up.

The result season –

This result season has been more tilted towards disappointment, nevertheless there were some green shoots in major sectors as well as surprises in midcaps. On a disappointment side PSU banks were a shocker. Almost every PSU bank came out with deteriorated asset quality and provisions increased multifold, in some cases 3 times. Certain infra companies and cement companies met the expectations on the other hand. Two wheeler auto companies posted a record sales in Diwali and E commerce companies are finding 24 hours less to sale their products. Major consumption companies like Titan shocked the street with weak numbers where as shoppers stop, Vijay sales and future retail posted expansion in margins and top lines. The companies’ likes of Thermax posted a great result on the back of exports but the domestic sector was yet to pick up for them.  The Q2 results didn’t show any recovery and that has left many investors worrying. The market run up has been making many such investors feel  the valuations have run up very fast and situation on the ground is not supportive.

Government actions –

Many believe government talks of reforms have yet not been the reality. Whereas I feel this government has shown and convinced investors that It can take tough actions for the benefit of India. This conviction has added to the euphoria of FIIs for india which will not wane so easily as each one of them knows reforms can’t be equated to instant coffee.

The Modi government has rolled out some key reforms, including diesel deregulation, allowing private participation in coal mining, liberalizing the foreign direct investment regime and changes in labour laws. It has also unveiled initiatives to turn around country's manufacturing sector through its "Make in India" programme and by announcing to make submarines in India. Initiative of Jan Dhan Yojana has also been a fair success and is going to be ongoing activity. Some constructive action is also expected on land reforms. Apart from this Mr Modi’s social agendas like “Swachha Bharat” mission, “Clean Ganga” mission going to help India in long term in improving the tourism and domestic connectivity.

What is going against India –

The major negative news against india’s economy is increasing fiscal deficit for this year. We are almost at 82.6% of budgeted estimate for the year. The tax revenue collection has been tepid (I hope the black money trail is real & it may add some revenue). The expected disinvestment programme as usual may cover up the short fall.

The European economy still showing signs of weakness. Although, easing is expected in Europe but still it is more of a speculation yet. However, geopolitical scenario has been stable.

Global Scenario –

The BOJ couldn’t have timed QE better than this. The US QE has just been over but the data couldn’t have been soother than this and it is expected to be so, for some time. US FED has been assuring of no interest rate hikes unless they get a comfort of consistent better jobs data. There is an expectation of easing in Europe which may be addition to flush liquidity. Recent bygone election results in Brazil which favored pro incumbency has made it all the more not so favorite and falling commodity prices make it more vulnerable. All this has led to make India a more favorite destination which has lot many positives - Interest rate cut, pro growth government, improving consumption story, rerating candidate, falling commodity prices. India, Thailand & Indonesia are expected to be favorites.

My View –

It is certainly agreed that the growth has not picked up in India and it still needs a push. Actions like interest rate cut, additional impetus to manufacturing, improvement in ground level activity will have some impact. These all actions will result into results after some time at least 6 months. Nevertheless, everyone has to agree that this government has been taking pro growth measures, the results of the same are going to be visible in some time and patience will be the name of the game.

But, these actions certainly have created an euphoria around India, may be corporate results may not support it. But I feel the news around government actions till budget will keep the markets very happy. In the process markets will become expensive. On a forward earnings basis we are at 19 PE which is not cheap but certainly not expensive. I feel we have got a room to expand. My hunch is by April we will be around 22 to 24 PE which can have Sensex in the range of 32,000 to 34,000 and nifty around 9500 to 10,000. In this valuation range india will certainly face a risk of correction may be in the range of 20 to 30%. Its been quiet sometime we have been expensive.

Mind you, only Apple I phone is expensive because it has demand justifying its value and apply the same logic to India.

This market is unarguably buy on dips. A wait for correction may be quiet a longer one and yes there will be a correction but it may have your jaws dropped to unbelievable number on index before that.

Its my hunch!  

Are we sitting on breakout?                                                                                                                         

Its been quite some time to have penned down my thoughts. Markets have been keeping everyone busy. It has been hell lot of rally and yes those higher double digit returns corrupt the mind to just raise your confidence to arrogance level and investments slowly take a shape of betting. That’s the cycle I somehow have been trying to avoid. Nevertheless mind is prone to corruption.  Anyways, I am just going to write something about the view on markets, is it good time, is there any risk or no. let me make the thoughts more structured. I will avoid divulging much numbers.

Yes the rally in markets has been real, money flow has been amazing. At 26,500 we are sitting at almost 20 times current earning. I will not try to value market at future earnings as according to some analysts we may be at 16 times which is long term average. Analysts are justifying the stocks like reliance on FY16 valuation that’s rubbish according to me. We are no way cheaper at this juncture, lets accept the fact.

China as usual is much cheaper and available at mouth watering levels. China is just like Indian PSU banks whose PE multiples make them look darn cheap in any market and investors always get lured but HDFC bank despite being expensive outperforms the lot. FIIs always in emerging market rally give allocation to china and come out crying each time. India has a history to support as it has since 90s generated arguably the superior returns. So we are not cheap, nevertheless we are on the cusp of breakout. The consolidation for last one month clearly suggests the markets are waiting to breakout. All the numbers from finmin have been extremely encouraging, Mr Modi  has been making pretty good noises and fingers crossed his every step has been towards execution. The overall sentiment booster is actually the thing which he has been feeding.

Is it a good time to invest?

Indeed it is! But I will complicate the matters a bit here. We are sitting at 26,500 20 times earnings. Markets may chose to take the two kinds of routes from here for upside-

1. I expect the GDP number for Q1 to be a pleasant surprise and markets may take this as an event for breakout and we reach 30,000 Sensex in jiffy by December (may be early). Rally may begin from Monday, all factors are favorable- Crude is trading at extremely comfortable levels, inflation numbers look good, money flow remains smooth, US numbers are good and QE is reducing but its there yet, monetary easing in JAPAN and Europe may accelerate. Post December the real correction begins but 24,000 I feel will be a base and wont be breached. But that’s a good 20% correction you have been waiting for and markets look reasonable at 15-16 multiple. Here you will see the news like Mr Rajan goes right again, crash to continue and what not. The reason for breakdown will be global, Either the US rise in rates or crude spike or Europe again or Russia.

So it makes a sense to invest now and be a part of roller coaster ride as you will be at gains certainly.

2. Second thing that may happen is we have a consolidated & structured rise in broader index and good stocks perform and bad stocks and sectors get the beating. The reason could be all global investors behave cautiously on the back of geopolitical scenario worsening and in anticipation of US QE reducing, the rise could be more structured and we will have 5 -7% kind of corrections. I can’t comment on levels we see but certainly we will be 27,000 -28,000 kind of levels by March end. I believe this will be very hard time then as we will certainly be outperformer for the year but the markets will be listless. Still the investment will make sense as stocks and mutual funds will outperform in this scenario too.

Some may call my writing audacious as I am not giving any chance to a fall from here. A fall from here is certainly a possibility as we are not cheap at all but overall euphoria I feel won’t die in vain and so I am not considering that as probability in near future. Many people are sitting outside and may just be disappointed with me.  

My view -

I feel we are going to see much more valiant market. We certainly will have one fall but waiting for it may not yield anything.  Fixed income investors also have reason to cheer as very few are praising the efforts of Mr Raghuram Rajan. Rajan has been targeting inflation and using the interest rates as a gun pointed on the government. But, in a process may be first time an RBI governor is trying to create positive real return in economy. Fixed income blamed for not creating wealth may also be wealth creator for many in the process.

There are innumerable turnaround stories in the market, I am also working on the few, these are the multibagger ideas of the future, some have started working and some are in a process. Be vigilant but follow the allocation tactic. Or use wealth managers like me (:P).  

Risks –

Virtually there seem to be no risks for equity investors in near future and that’s the case always and so the “black swan” keeps us on the ground.

US risk  -

Money flow faces a bigger challenge in the near future. The hunky dory US economy which was fed by FED with QE will see stoppage of QE and virtually every analyst agrees the US will raise the rates in future. The trajectory of these rate hikes will decide the fate of Emerging markets in that tenure. Nevertheless, unprecedented level of easing by Japan may compensate a bit. Europe as well may see some kind of easing, its been some time, that EU nations have been demanding weak euro to boost exports, if it happens the robust US scenario may be taken over by robust Europe.

Some shocks will certainly be there. Existing geopolitical scenario possesses the power to change the track of markets overnight. Any kind of move by Russia over Ukraine, Palestine Israel issue, Iraq and even Pakistan may change the trajectory for markets. You cant plan for these but former issue I guess most are planning.  

How to plan for these?

Asset allocation is the only key. we are expecting  jaw dropping numbers in Sensex in next three years, Keep doing SIPs, invest more part of your savings, Use right instruments to invest in equities, avoid quasi products like ULIPs, some broker schemes promising 10 time returns. By keeping things simple you will be there. Have fixed income exposure, no harm in looking at 3 years FMPs, 9% tax free returns is damn good allocate for long term.

NO REAL ESTATE, NO GOLD, NO OTHER INVESTMENT INSTRUMENT HAS BEATEN EQUITIES IN LONG TERM. BUT ASSET ALLOCATION IS THE KEY!!!!!

How the 2014 is going to be?

How the 2014 is going to be?

Mostly when we ask the question how the 2014 is going to look like, everyone is taking it only politically. BJP supporters say its going to be MODI and rest say it’s going to be hung parliament and credit will go to AAP. Financial markets as well are weighing too much on the elections, they say if we have stable government then markets are going to be good else we have bad days nearing us. Is it really the thing? Can election be so much of deciding factor for India in current economic scenario?

I feel otherwise, I feel anyways we are in challenging times & will face lot of trouble come what may! Current vote on account in fact reinforced what I think and united bank of India tragedy is giving lot of signals.

Mr Chidambaram has left the time bomb ticking in this vote on account I feel. His triumphant claim that  he met the fiscal deficit target at 4.6% which almost every analyst, news channel and anybody who understands Indian accounts has called a blatant lie. Rollover of subsidies from current fiscal to next fiscal this year has on record been only Rs 35,000 crore and total fuel subsidy including this amount has been planned at Rs 65,000 crore. So if one removes the rolled over amount the fuel subsidy is going to be around Rs 30,000 crore against current year booked expenditure of Rs 85,000 crore. This alone means Rs 55,000 crore gap in fiscal (staggering USD 8.8 bn) if one was to think the spending will be at the same level.

Ashok Gulati of the Commission for Agriculture Costs and Prices (CACP) has said that the budget has not admitted to Rs 80,000 crore of food and fertilizer subsidies. Food corporation of india in case these subsidies are left unaccounted will be left with option to issue bonds which will create an additional burden or the next FM will account it to clean his slate which has always been the case.

The planned expenditure if has not been spent this year, its purely gimmickry by Mr Chidambaram as the India cannot contract in any ways and expenditure will just grow next year.

Its very strange that neither our revenues grew more than the target nor exports ballooned. We did not see extraordinary FDI in India despite that Mr Chidambaram has shown us 4.6% fiscal deficit and neither of us has objected the accounting. This is pure fraud if it was in any other company and auditors would have qualified it.

So the bottom-line is we are in risk to see increased deficit number next year unless we see another magic. The Nymex crude at this point is at USD 102. Crude always has at least one good rally in a year if it has to happen again this year India will not take it positively.

Indian bank’s NPAs are showing up slowly. United bank of India is live example. Government may get away by saying its one of its kind case but almost every financial expert is aware of Indian PSU banking system which has had a history of manipulating NPAs and no wonder they traded always at such a low valuations for so long. It seems now it is becoming impossible to adjust them with numbers. This thing may have cascading effect and may spread as wildfire.

There are two risks, one being banks fraudulently lent without collateral and second the collateral itself is insufficient. IN United Bank’s case it was evident that many small accounts have also turned to be bad. It cant happen only with this bank only. The collateral the banks take mostly is real estate with many accounts turning bad the biggest pressure may come is on real estate. I am very sure the real estate may give up in some days the breath it has been holding for so long.

India on the other hand faces the risk of prolonged period of high interest rate. Most of the financial experts have been citing the 6 month as maximum tenure for this kind of interest rate scenario, whereas I feel we may see it for quiet longer. The credit to deposit ratio in no way going to come down. Reasons being  the economy is very much not going to expand next year at least very much certain for next six months  and savings rate will not grow for the same reason. Credits are not going to come down in any case as NPAs are mounting day by day  and forget about repayment.  We are trapped badly in high interest high credit to deposit ratio kind of scenario.

The increase in fiscal deficit, expected increase in crude, low expanding economy all are going to pose great challenges for rupee and interest rate scenario. These things may bring back the fear of ratings downgrade back to the markets.

Moreover this year again the El- nino is expected. If the monsoon is to face any kind of trouble we are very much in for a very big trouble.  In all 2014 to me doesn’t sound good at all. I see lot of risks to all asset classes. Gold and silver are the best bet. Liquid funds, FMPs and accrual funds may outperform the markets again. Equities may go up to some extent or consolidate mainly because of the valuation. But I am very sure there are lot more better countries are available. I am really not certain on foreign inflows in that case.

I am sorry if I sound too depressed but let me tell Mr Raghuram Rajan is already watching it too keenly and he has a tremendous power to depress us all. He must be thinking 50 bps more, lets see!!

Equity markets------

Bull run a black swan kind of event (never seen just heard) in my professional life has been a very big decision maker for choosing a financial industry apart from love for the investment complexity. It has since then pinched me as “Where am I?”. It has been very tricky for me as I have just been calling 15 to 20% rallies in the markets as Bull rallies (Irony of my life).  Every Diwali I hear from Rakesh Jhunjhunwala it’s a bull run and then a 5 - 10% rally makes me feel- that’s the bull (cat) run. So in short, Bull run is just a fictitious event till date for me. Overall last 5 years have taught & shown all those events that make markets bad!!! Good way to learn (or lose).

Anyways, after having a tremendous negative view, suddenly yesterday I built pretty positive positions in portfolio. Things started looking great, after a while better and then the fear lurked what if I read it wrong.  Fundamentally mostly finalized target of 5200 on nifty got revised and now 5450 seems to be the base.

Gigantic current account deficit of 6.7% predominantly because of gold and crude imports, slowing GDP at 4.5%, IIP numbers negative to marginally positive and political drama, no change in these situations in the markets made me give negative presentations to all my investors till last week. Gold crack made me very happy as it happened as I wanted and would love to see it at 22,500, won’t happen one way but that’s the way it should be. Gold negative, equity negative, real estate extremely negative made me think last Sunday where should one invest and it seemed end of the world to me. Couldn’t think of anything positive.

And then the Global commodities sell off and gold nearly after testing lot of patience cracked, Brent crude suddenly below $ 100. All the factors that made my view are turning out to be positive. I wont get into hassles of divulging too many numbers to confuse you, but the crude basket for India suddenly starts looking great i.e., below $ 100 and surprise surprise inflation is below 6%. That’s a killer combo.

Inflation below 6%, crude expected to go much lower, gold cracking - all will make current account deficit number better, this in turn strengthen rupee. Inflation will fall or at least the numbers will be lower on larger base effect. This should actually propel RBI to reduce rates with conviction (this time at least after so many forced reductions). Bond market is already celebrating the rally and cut is getting factored in. Any rate cut above 50 bps will be a huge sentiment booster and certainly indicate the bottoming out and revival of investment cycle. GDP numbers on the back of lower GDP last quarter should actually be much higher. Infrastructure, capital goods and many midcaps start looking much better and as usual market will rally ahead of times.

All seems to be set for a good breakout and rally. First banks & rate sensitives in anticipation of rate cut and then the rest in the hope of revival should run away. My personal view 6000 should be much easier to attain. I may go wrong but the situation seems much much better for sure.

But , but and but there is also a cautious stand. You are on the verge of global sell off, i don’t know that, but if crude falls to $ 80 from hereon we are certainly going to witness the global sell off and India wouldn’t be an exception and it will fall. India in the past has fallen with crude although the fall is actually a good omen.  But I would lap up Indian markets as much as I can if that happens. Indian markets falling with its own fundamental issues no reason to buy, Indian markets falling because of global issues is just a sentimental issue and nothing like it is  a better opportunity.

Indian markets valuations with the fundamental issues getting fixed now are looking attractive. Valuations are of no use if fundamental problems persist, they only make sense when the things are actually right. Nobody is buying Kingfisher because of valuations although its damn cheap, its only when you see the problems getting fixed. Mind you, there is no policy change, political risk still is a concern. Against all odds I choose to become positive finally in short term ( 3 to 4 months). At all time peak probably we again see massive sell off from retailers who regain finally their capital after 5 years and may choose to move out.

 One big problem is real estate for me. I feel its time bomb ticking. These 20 – 80 schemes are just the “screw you” schemes. But, I don’t feel its an immediate concern. Another big concern is the global flood of liquidity which is actually an artificial one. The day it stops the western world realizes their own worth and that will be catastrophic. its actually very strange to close on negative note while I am actually positive for equity markets right now.

All above assumptions are just with expectation that the crude and commodity sell off. I hope finally it pays off…. Equities, Please please please show me a bulllllll runnnnnnn…….

Gold go slow now

Gold has again started creating buzz as it reached near all time high of Rs 29,516 per 10 grams. Everybody who said you to buy gold will again be saying look I said you. The rising level of uproar about gold breaking records at the same time thoughts of stalwarts like Warren buffet that gold has no value might be creating lot of confusion for many investors.

As far as India is concerned, Gold has always had a significant importance in our culture. One cannot imagine wedding without gold jewellery in India. On every traditional occasion in India, Gold is a must. Indian culture provokes investment in Gold in phased manner like Makar sankranti, Gudhi padwa, Akshay Tritiya, Guru Pushyamrut.  So if we really see, house makers, who have been religiously following accumulation of gold without looking at price on these occasions, have turned out to be the best wealth creators as compared to their husbands who have been actively trying to create wealth through various options.

Gold as an asset class gives lot of comfort to Indians. They do not mind its value going down; in fact the price correction in case of gold has always been sought as an opportunity to buy more and more gold. The comfort was always there as the asset class always was bought with motive of only holding and never with the motive of profit booking. The scenario now has changed a lot, with many options available to speculate gold prices now, many are investing with small time horizons.

Reason to speculate is very easy, since last 6 years the gold has created wealth at abnormal rate of return of greater than 20% year on year. No asset class has really come near gold. In fact 2010 to 2011 return was bumper 43% (on calendar year closing basis). For an asset class theoretically expected to beat inflation, these kinds of super normal returns are exceptional.  Just for the amusement purpose let me divulge interesting details. 10 gram of gold in 1950 cost Rs 99, in 1970 Rs 185, in 1990 Rs 3200, in 2010 Rs 18,500 & now its again creating new tops, on back ground of, US GDP slow down, dollar weakening & what not at Rs 29,400.

So the above data clearly makes a good case to invest in gold no second thoughts. But let’s think this way, would you buy any commodity, stock or any other tradable thing which has consistently for some period of time has crossed its long term average rate of return. Let me make it simple,  Stock A has long term average rate of return 10% and since last 5 years it has given 20% return and nothing fundamentally changed. This will make me concerned. I will call it either overpriced or over bought.

The 2008 crisis, slowdown fears, Europe crisis all lead to a rise in price of gold due to uncertainty. These things were unknown and many large investors went in for gold, then, straight away. These are the realities today, certainly gold will also show some volatility but I don’t feel now these known uncertainties decide the gold price route.

Then you may say, its after all gold, it has always given positive returns only. See the fact is, long term return on gold has been positive only. It’s the same case for all asset classes be it sensex or real estate in that case.

Let me make a case for you, somebody who invested in gold in 1993 to 2001 had a single digit returns till 2005 which did not beat inflation as well. 1976 to 1981 gold had phenomenal run similar to today’s scenario. Gold from Rs 432 Reached Rs 1800 in a matter of 5 years. Compounded return of 33%.  Thereafter had a mixed bag returns.  Statistically if I have to study, on data for last 88 years, average time taken by gold to double has been 9 years. There have been scenarios where it has taken 4 years to double as well as in some scenarios 17 years.  If I consider average period where most of the investors will be lying, the return is 8% p.a. compounded.  The long term average return is not more than 8% on gold.

Recent run up in gold run seems to suggest that gold uptrend may halt now. Expectation of gold price coming down is very low but expecting a similar run up in the gold for next 3 to 5 years may lead to disappointment. Gold as an asset class has to be part of the asset allocation in reasonable manner. Accumulating gold for consumption (marriage and jwellery requirement) purpose should not stop. One should look at accumulating gold through SIP format , NSEL has come out with very good and innovative concept of dematerialized gold, e – Gold, which is very cost efficient and easy , one can also accumulate  through ETFs.

The economical scenario across the globe makes gold a most desirable commodity, if hell breaks loose and Europe just falls, then, certainly gold will climb the new highs. The probability of this happening is very low, nevertheless gold will certainly show the volatility in near term.  Gold has always acted as the best reservoir of wealth and so it needs to be part of your asset allocation.

Accumulate gold through SIPs, buy on dips, don’t rush. Allocate reasonable proportion to gold and don’t do unreasonable gold buying. Don’t wait to buy gold for consumption and keep on accumulating through SIPs.