Gold vs equities: Will Indian investors shift to stocks amid surging gold prices?

Indian households are expected to continue investing in gold despite the boom in equity as an asset class as they consider the precious metal to be a store of value, according to a research report by brokerage firm Kotak Institutional Equities.

“Indian households will likely continue to see gold as a store of value, despite the rise of equity as an asset class,” said the brokerage as gold purchases in the Indian market surged to high levels in the last three to four-year period.

Gold vs Equity Investment

According to Kotak data, Indian households purchased around $300 billion of gold between the financial year 2015 and the first eight months of the 2024-25 fiscal year.

Meanwhile, Indian households have made $194 billion of equity investments between the period of the calendar year 2015 and the first two months of the calendar year 2025, according to Kotak data.

“Current uncertain economic scenarios bode well for gold & silver, making them a perfect sought-after destination amid gold serving as a natural hedge against equities since September last year,” said Naveen Mathur, Director of Commodities & Currencies at Anand Rathi Shares and Stock Brokers. 

“Since gold serves as a hedge against uncertainties, one should always consider diversifying portfolio into equities, precious metals & debt instruments to optimise returns during uncertain times,” he said.

Expert Views on Gold

According to the Multi Commodity Exchange data, gold futures rose 0.3% to ₹86,269 per 10 grams on February 24, compared to ₹86,010 on the previous commodity market close.

Mathur of Anand Rathi Shares and Stock Brokers said the precious yellow metal is witnessing a struggle to record levels, with the market awaiting fresh triggers for a further upward movement.

“We expect gold to test ₹87,900 to ₹88,500 per 10-gram levels in MCX futures in 1 to 2 months scenario, a move closely aligned with $3,040 to $3,050 per oz levels in international markets,” said Mathur. 

On the global gold front, the commodities expert said, “Gold prices traded at record levels but witnessed a struggle to breach above the same in day trade today, witnessing consolidated moves and awaiting fresh fundamental triggers where an upside breakout above $2,950 per ounce could trigger a rally toward $3,000 to $3,040 per oz. Key economic indicators that will shape the market this week include US GDP data, consumer confidence, and the core PCE price index.”

“Traders and investors should closely monitor the reports on personal spending & income for January month. Meanwhile, silver’s outlook remains positive albeit profit booking moves to persist in the initial half of the week. As inflation fears persist and geopolitical risks grow, silver’s dual role as a precious metal and an industrial commodity provides a robust foundation for further gains in a medium-term scenario,” said Mathur.

Changing Dynamics

Kotak Institutional Equities also noted that the consumption pattern within Indian households when buying jewellery is likely to change with the recent rise of lab-grown diamonds (LGDs).

Jewellery markets worldwide are facing a shift in customer taste and preferences due to the lower price of a lab-grown diamond than that of a naturally mined diamond. A natural diamond is more expensive than a lab-grown diamond. It holds a premium value in the secondary market, even though the LGDs have been adopted faster in developed nations.

According to the research report, the Indian jewellery market is at the early stage of the adoption of lab-grown diamonds, with the demand expected to take off going ahead, with customers moving to a mix of gold, natural diamond and LGD-studded jewellery. 

However, Kotak sees risks to the profitability of jewellery companies and stocks from this trend due to a higher market share of LGD-studded jewellery, lower revenues for firms due to the lower mix of physical gold in the overall gold purchases, and impact on valuations on any negative changes in the above factors.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.