The major investing trend that has dominated the year 2025 is the sharp underperformance of equities compared to precious metals like gold and silver. At a time when are trading with over 50% returns this year, the benchmark has seen just 6% rise.
Against this backdrop, the Sensex-to-Gold ratio has dipped well below its long-term average of 1.02x to 0.70x. The ratio measures the relative value of versus gold. And past such instances have coincided with periods when equities outperform gold over subsequent years, according to an analysis by Bajaj Finserv AMC.
Telltale signs?
The signs of this trend are likely unfolding in the market, as gold has corrected sharply from its peak of ₹1.32 lakh per gram to ₹1.22 lakh per gram.
The surge in gold was driven by fear and uncertainty on the back of geopolitical conflicts, like Russia and Ukraine and the Middle East crisis, and fears of a global slowdown amid from the US.
However, in the last quarter of the year, volatility began to ease, inflation expectations stabilised, and global equity markets regained confidence. The Federal Reserve’s likely rate cuts were already priced in, reducing the urgency to seek shelter in gold.
The result: Gold lost the premium that had pushed its prices upward.
At the same time, Sensex and Nifty have seen renewed interest on hopes of returning to Dalal Street, easing earnings concerns and the possibility of a trade deal with the US.
Time to sell gold and buy equity?
Bajaj Finserv AMC believes the setback in gold prices appears more like positioning and sentiment rebalancing than a shift in long-term fundamentals. As per the AMC, gold remains resilient, but equities just present a relatively better value in signs of shifting market dynamics.
“Gold now functions more as a core hedge than a growth asset, warranting moderate exposure while investors look to equities for incremental potential opportunities and stay alert to shifts in risk and valuation dynamics for long-term wealth creation,” it said in a note.
The latest AMFI data underscores this sentiment, as continued to attract steady investor interest in October 2025, with net inflows of ₹7,743 crore, following record inflows of ₹8,363 crore in September.
Rahul Singh, CIO-Equities, Tata Asset Management, believes that the period of consolidation for the equity market is reaching its logical conclusion.
“Overall, a combination of recovering profit estimates in the Indian corporate sector, along with a more reasonable global valuation premium, makes us slightly more optimistic about Indian markets over the next 12–15 months,” said Singh.
Similarly, analysts believe that volatility in gold prices will continue. Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said the broader trading range for gold is seen between ₹1,22,500– ₹1,26,000.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.