The freewheeling days of the stock market’s ride may have run the course—at least for a while. Over the last one month, since 10 January (until 14 February), the Sensex slid by 2,816 points, or 14%, to close at 17,766. On Friday, the Sensex was up by 2%, or 348 points. But, did you do a back-of-the-envelope calculation on how other assets in your portfolio performed when markets were slipping last month? Has your well-diversified portfolio helped you against the bloodbath that was Dalal Street? Here is the lowdown on how other assets performed (from 10 January to 14 February) when your equity market investments were going for a toss.
Gold: While the Nifty dropped by 15% last month, gold and silver jumped by 3% and 6% at Rs11,588 per 10gm and Rs22,038 per kg. Experts say gold is one of the best ways to diversify portfolio. The precious yellow metal’s price does not fluctuate the way equity and real estate markets do, and in the long haul, it tends to yield good returns. “Last month, when equity assets were in a turmoil, investments in other asset classes, such as gold and silver, would have given higher returns,” says Somnath Dey, head, metals and energy, Religare Commodities Ltd, a New Delhi-based broking house. “The strategy of dividing the portfolio in different asset class always pays off in the long run.” Shailendra Kumar, research commodities head of Sharekhan Ltd, a Mumbai-based broking house, agrees. “This year, gold is expected to perform better than the Sensex, given the high volatility of the stock markets. We are looking at the target of Rs13,500 and Rs26,000 for gold and silver towards the end of December.”
Crude oil: This commodity, another asset class, gained 2%. Gold and crude oil prices tend to move in tandem because rise in crude oil prices leads to high inflation. Result: Gold prices also go up on inflationary pressure because the metal is considered to be a hedge against inflation.
Debt funds: These funds performed modestly. Debt funds yielded only 0.39% but performed better compared with the 17% fall in equity funds. While some fund managers say equity funds slid reacting to the decline of underlying assets, others say it was because of excessive exposure to mid cap stocks.