Gold vs Nifty 50: Which is better for Indian investors for long-term? Explained with five crucial reasons

Gold vs Nifty 50: In the recent stock market rally, frontline indices — Nifty 50 and BSE Sensex — are set to end up with the biggest weekly gains after February 2021. The Nifty 50 index has risen around 4.45%, while the BSE Sensex has registered a weekly rally of 4.35%. However, this is insufficient for these key benchmark indices to outshine gold and silver in an investor's portfolio during the first quarter of 2025. In the first quarter of the current year, the Nifty 50 and the BSE Sensex have delivered zero returns by logging 1.70% and 2.15% YTD losses, respectively. However, the precious metals have given stellar returns in the first quarter of the current year. Gold prices have surged around 15% in Q1CY25. Meanwhile, the silver rates have delivered around 12.65% returns in YTD time.

As Donald Trump's tariff flare has played an essential role in this big gap of returns given by the Indian stock market indices and precious bullions, one may find it hard to choose either of these options while starting a fresh investment for the long-term as the US President has just covered first four months of his four years tenure.

According to investment experts, gold and the Nifty (NSE Nifty 50 index) are two of the most popular investment options in India. While gold is often considered a safe-haven asset, the Nifty represents the broader equity market and India's economic growth. So, it depends upon an investor's investment goal and risk appetite as to which investment option is suitable for whom.

Gold vs Nifty: Which is better? Top 5 reasons

Viral Bhatt, Founder of Money Mantra, believes that investment goal and risk appetite are essential factors that can't be ignored when deciding upon either Nifty 50 or gold for investing. He listed out the top 5 explainers as to what kind of Indian investors can look at gold or Nifty 50 stocks for long-term investment:

1] Long-term Returns

Gold: Over the last two decades, gold has given India an average CAGR of 8-10%. It performs well during uncertainty but lacks consistent long-term high returns.

Nifty: The Nifty 50 index has historically delivered a 12-15% CAGR over the long term, significantly outperforming gold in wealth creation.

Verdict: If growth is your priority, Nifty is the clear winner.

2] Beating the inflation

Gold: Gold is a good hedge against inflation, as its value tends to rise when the currency's value declines.

Nifty: Equities grow faster than inflation as companies increase profits and earnings.

Verdict: Both hedge against inflation, but Nifty offers better actual returns.

3] Volatility & Risk

Gold: The yellow metal is less volatile than equities and cushions during economic crises.

Nifty: Stock markets are subject to higher volatility but tend to recover and grow over time.

Verdict: If you prefer stability, gold is better, but if you can handle volatility, Nifty rewards patience.

4] Liquidity & Accessibility

Gold: Physical gold has liquidity concerns (purity checks, making charges), but digital gold and gold ETFs solve this.

Nifty: Stocks and index funds can be easily bought/sold with high liquidity.

Verdict: Both are liquid, but Nifty offers more straightforward and faster transactions.

5] Portfolio perspective

Gold: A good diversifier that reduces risk in a portfolio, especially in downturns.

Nifty: The core of a growth-oriented portfolio.

Verdict: A mix of both is ideal, with a more significant allocation to Nifty for long-term growth and gold as a hedge (5-15% of the portfolio).

So, in the current market scenario, gold is a better choice for Indian investors who want stability in their portfolios, while Nifty 50 listed stocks can be a good option for investors who want growth in their portfolios irrespective of the five factors mentioned above.

Advocating a diversified portfolio for long-term investors, Narinder Wadhwa, Managing Director & CEO of SKI Capital Services, said, "For long-term investment, both gold and the Nifty 50 have their strengths, but they serve different purposes. Historically, the Nifty 50 has delivered higher average annual returns of 12-15%, making it ideal for wealth creation in a growing economy like India. In contrast, gold has provided 9-11% annualized returns but has significantly outperformed equities during economic crises, offering 31%. Gold is a hedge against inflation, economic downturns, and currency depreciation, while Nifty benefits from corporate earnings growth, innovation, and rising investor participation. However, Nifty is more volatile, with sharp corrections during crises, whereas gold provides stability in uncertain times."

Gold vs Nifty 50: How to rejig portfolio?

"For a well-balanced portfolio, a combination of both assets is ideal. Nifty 50 is suited for high-growth investors looking for long-term capital appreciation, while gold is best for stability and risk management. In periods of high inflation or geopolitical uncertainty, increasing gold allocation can safeguard wealth, while equities tend to generate superior returns during economic expansions. A common approach is to maintain an 80:20 ratio in favour of equities in stable times and shift towards 60:40 or 50:50 when risks increase. Currently, we suggest 80:20," said Wadhwa of SKI Capital Services.

The SKI Capital Services expert said the choice depends on an investor's risk tolerance and financial goals. Still, diversification across both asset classes ensures a balanced approach to long-term wealth creation.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.