Stocks outshine gold, silver with better returns in 2013

It was a year of stocks shining bright when it comes to adding to the investors' wealth, and the glitter of gold and silver fading for the second straight year in 2013.

Measured by benchmark index Sensex, stock market has generated a positive return of about 9 per cent for investors in 2013, while gold prices fell by about three per cent and its poorer cousin silver plummeted close to 24 per cent.

After outperforming stock market for more than a decade, gold has been on back foot for two consecutive years now vis-a-vis equities, shows an analysis of their price movements.

"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated tapering over last several months combined with FII investment in Indian stocks.

"This movement has been equally true for global markets as 2013 saw gold losing its shine and markets coming back with a bang," said Jayant Manglik, President Retail Distribution, Religare Securities.

"As always, gold and stock prices follow opposite trends and this year was no different except that both changed direction," he said.

Improvement in the world economy has brought the risk appetite back amongst retail investors and this has drenched the liquidity from safe havens such as gold leading to its under-performance, an expert said.

In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of about 12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.

According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have particularly shown great strength post July-August 2013 when RBI took some strong measures to control the steeply depreciating rupee."

"When the US Fed gave indications that it might taper its stimulus programme given the economy shows improvement, a knee-jerk correction was seen in most risky assets, including stocks in Indian markets. However, assurance by the Fed about planned and staggered tapering in stimulus once again proved to be a catalyst for the markets."

Dhakan further added, "This complemented by RBI's strong measures to control rupee depreciation supported the equity markets. Improvement in political scenario and concrete measures to bring down the current account deficit by the government also helped markets."

Analysts say gold prices also fell due to hike in customs duty to 10 per cent and import restrictions imposed by the government to contain increasing precious metal demand.

The government took steps to curb imports of gold on concerns about the country's current account deficit (CAD).

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