The Nifty 50–gold ratio, a key gauge used to track the relative performance of equities versus gold, has inched up to 1.57 from 1.5 last week, signalling a potential shift in market preference. A rising ratio typically indicates that equities may begin to outperform gold, as investors gradually move away from safe-haven assets and increase exposure to stocks.
The recent uptick in the ratio has been driven by a strong rally in equities, with the Nifty 50 gaining over 1,650 points in the first five sessions of April, while gold prices remained volatile amid strength in the U.S. dollar.
Historically, periods when the ratio has fallen below 2.5 have often been followed by a healthy upside in the benchmark index, suggesting that current levels may point to a favourable setup for equities. The ratio essentially compares the value of the Nifty 50 index with gold prices, offering insights into relative valuation and investor sentiment.
However, markets turned cautious on Thursday, April 9, tracking weak global cues as optimism around the U.S.-Iran ceasefire faded following reports of violations. During intraday trade, the Sensex dropped 938.5 points, or 1.2%, to 76,624.35, while the Nifty 50 declined 238 points, or 1%, to 23,759.45.
Meanwhile, MCX gold prices slipped 0.7%, or ₹1,129, to ₹1,50,647 per 10 grams, weighed down by a firm U.S. dollar ahead of key inflation data later in the day. Gold also traded in the red in global markets, keeping the overall sentiment in precious metals subdued.
What the Nifty-Gold ratio is signalling now
According to market experts, this suggests Indian equities may be looking relatively attractive compared to gold, even as the yellow metal continues to enjoy support from global uncertainty.
“When the ratio begins to rise, it indicates Nifty will outperform gold, and economic growth is strong, along with a higher risk appetite. In this scenario, investors prefer stocks over safe havens; they increase equity allocation and reduce exposure in gold,” explained Nirpendra Yadav, Sr. Commodity Research Analyst at Bonanza.
Yadav explained that a rising ratio typically reflects a bullish phase for equities, where investors shift towards riskier assets amid improving economic conditions. Conversely, a falling ratio points to a risk-off environment, where gold tends to outperform due to recession fears and geopolitical uncertainty.
He added that when the ratio remains low — as seen during periods like 2008, 2020, and even now — equities are relatively cheap compared to gold, often marking a potential long-term wealth creation phase. On the other hand, elevated ratio levels are usually seen in late bull market stages, when investors gradually rotate back into safe-haven assets.
Meanwhile, Bhuvan Gupta, CIO, Client First Capital, pointed out that the Nifty/gold ratio is close to 1.5-1.6, which is its lowest range, even below the March 2020 level.
“It indicates Indian equities are cheap as compared to gold. This translates to Indian equity is a buy right now, but gold is not necessarily a sell,” he added.
Gupta further noted that while equities appear attractive at current levels, gold may still remain supported due to global macro conditions. He pointed out that if the global economy avoids a recession despite ongoing geopolitical tensions, investors could benefit from exposure to both asset classes, similar to past cycles.
He also highlighted that recent conflicts are adding to global inflationary pressures, which tends to support precious metals. At the same time, relatively muted returns from Nifty over the past one, three and five years suggest there is room for upside in equities.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
