Nifty-Gold Ratio Hits Historic Low as Stocks Eye Catch-Up

The Nifty-Gold ratio has fallen to 1.6, its lowest level in over a decade. This divergence between gold and Indian equities is causing market chatter, with investors wondering if stocks are about to catch up.

Gold has gained 13% this year, while the Nifty has slipped 6%. The Nifty-Gold ratio is calculated by dividing the Nifty 50 index by domestic spot gold. A low ratio indicates that equities have underperformed gold.

A ratio of 1.6 suggests stocks may have room to rebound, but it's not a guarantee of a rally. Historically, instances where the ratio fell below 2.5 were followed by strong Nifty rallies, although the size and timing of those moves varied.

Currently, foreign investors are buying Indian shares again, with net purchases totaling $1.5 billion in August. This shift in direction is positive for equities. However, crude oil prices remain a concern, hovering around $90 a barrel due to fading hopes of a US-Iran agreement.