Gold's Surge Poses Economic Challenge as Indian Stocks Lag
India's stock market today has been sluggish, with the BSE Sensex dropping from its peak of 85,978 points in September 2024 to around 80,267 points by the end of September 2025. Meanwhile, gold prices have soared, reaching a lifetime high of Rs 1.20 lakh per 10 grams. This trend has led hedge fund manager Akshat Shrivastava to warn that new investors may shift their money from stocks to gold jewellery.
Gold has outperformed the NIFTY-50 index over the past five years, causing some investors to question the value of stocks. The sharp rise in gold prices, coupled with the underperformance of the stock market today, has led to an outflow of money from stocks into gold jewellery. This shift is concerning, as nearly 70% of India's gold is held in the form of jewellery, posing significant economic challenges.
The government misses out on potential tax revenues due to the illiquid nature of gold jewellery. Capital gains and securities transaction tax (STT) are not collected on these transactions. Additionally, silver prices have also hit new highs, climbing by Rs 500 to Rs 1,50,500 per kilogram, marking a 67.78% increase from the start of the year.
Akshat Shrivastava's warning highlights the potential impact of the current trend on India's economy and government's fiscal health. If the stock market today does not improve, new investors may continue to shift their money into gold jewellery, further reducing the government's tax revenues and posing challenges for the country's economic growth.
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