‘Gold, silver may settle in a range, equity to outperform commodities’

After the announcement of the India-US trade deal on 2 February, foreign flows are set to reverse, as other global markets have already performed well and become expensive too, said Viraj Gandhi, chief executive officer at Samco Mutual Fund.

- Srushti Vaidya & Apoorva Ajith

A 20% rise in gold prices in a month is a statistical rarity, which happened in 1971, after which prices fell. Now gold and silver have become such large economies in themselves that they might not move this fast, Gandhi said.

Edited excerpts:

Foreign flows are most likely to reverse now. This may be the time to buy the India story. Foreign investors will be looking to buy India, as the US, South Korea, and China have become more expensive relative to it. And these markets are already at the peak, so how much more growth from here on will it lead to?

Ideally, the money should be returned to the books, as India is now potentially attractive. India is a structurally strong story, but the rally we had from covid till October 2024 made India comparatively expensive. India had a premium compared to other markets, which is why FIIs (foreign institutional investors) needed to sell India and buy something else. But FII flows usually will be a gradual reversal. Domestic investors are doing well. And once FPI (foreign portfolio investment) flows resume, the market will resume the upward move.

Over the next two years, we believe the equity market may make money, while gold and silver may not make much. That doesn't mean it can't rally. But assuming gold and silver rise by 20%, the equity market may rise by more than 20%. Now gold and silver will come into a range. Investors should consider consulting a financial adviser before investing due to market volatility.