Mumbai, Jan 23 (IANS) Indian equities are currently trading near multi-cycle relative lows compared with gold and silver and historically, such valuation divergences between financial and real assets have coincided with phases where diversification beyond pure equity exposure has helped investors preserve capital and manage volatility more efficiently, a report showed on Friday.
Importantly, this does not signal a structural shift away from equities, but rather highlights the importance of balance during transitional phases of the market cycle, according to the report by PL Asset Management, the asset management arm of PL Capital Group (Prabhudas Lilladher).
It noted that Indian equity markets are navigating a phase of consolidation marked by global uncertainty, uneven participation and cautious investor sentiment.
“While domestic macro fundamentals remain structurally strong, near-term equity performance has been constrained by external headwinds, resulting in market returns being driven by a narrow set of stocks rather than broad-based participation,” the findings showed.
Technical indicators suggest that only a small proportion of stocks have consistently traded above their long-term moving averages, highlighting the fragility beneath index-level resilience.
This divergence indicates that while Indian equities remain fundamentally sound, the market has yet to transition into a durable, broad-based uptrend, the report noted.
Against this backdrop, precious metals have significantly outperformed Indian equities, reinforcing their role as effective portfolio stabilisers during periods of equity consolidation.
Gold and silver have benefited from a combination of global factors, including sustained central bank demand, currency volatility and persistent geopolitical uncertainty. Silver has additionally been supported by its dual role as a precious and industrial metal amid constrained supply conditions, said the report.
“Markets are currently in a phase where outcomes are being driven more by asset allocation than by broad-based equity rallies. While India’s long-term growth fundamentals remain intact, near-term volatility is inevitable. Gold and silver have once again demonstrated their relevance as portfolio stabilisers, helping investors manage risk and stay invested through periods of market consolidation,” explained Siddharth Vora, Head-Quant Investment Strategies and Fund Manager, PL Asset Management.
Looking ahead, Indian equities are expected to benefit from a gradual recovery in domestic earnings and potential global capital rotation as valuations in AI-led global markets normalise.
--IANS
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