Gold bullion is the place to be in: Religare Sec

Akshaya Tritiya is said to be one of the auspicious days for buying gold.  The buyers have a wide range of options to buy gold on this day but it is necessary to understand whether one is purchasing gold for investment or as jewellery or just because it has been a tradition.

Jayant Manglik, president - retail distribution at Religare Securities said, “Given the lack of investment alternatives across the world, bullion is the place to be in.”

He further adds with the rupee declining against the dollar, there are too many things which are in favour for Indian clients to get into gold now.

Manglik says trading gold ETF’s have become smoother and for clients investing in equities, in bonds should definitely look at investing upto 25% of their portfolio in precious metals like gold and silver.

Also read: Look to accumulate gold on monthly basis: Scotia Mocatta

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Aso watch the accompanying video.

Q: Is this a good time to get into gold with any fervour because we have reached a stage where just about everyone is asking whether one should buy gold? Are we entering at the wrong time if we have not already had enough investments in gold?

A: Just a couple of things. One is that we have had a 30% gain in rupee terms over the last one year. 25% CAGR (Compound Annual Growth Rate) over the last five years and for the last 10 years, if you draw a graph it’s just straight 45 degree line which simply goes up. So an asset which has been going up for such a long time, there will be some place where it will turn. But I am not sure that this is the time, because the reasons which made this happen in the first place was essentially negative real interest rate that scenario continues as it is.
 
Given that there is lack of investment alternatives across the world, bullion is the place to be. I would say that this price rise is going to continue for sometime now, especially in rupee terms. With the rupee declining against the dollar, there are too many things which are in favour for Indian clients to get into gold now.

Q: What’s the percentage that one must put into gold? Is there a standard thumb rule of say 10% or so? Does it change with a person’s investment philosophy?

A: Typically, one would have recommended that around 10% should be in bullion. But given the special circumstances we have had in the last couple of years investing up to 25% would not be out of line at all. So clients who would be investing in equities, in bonds should definitely look at investing a significant percent in gold. Up to 25% of their investing portfolio could be in gold and even silver.

Q: Give us a sense on how exactly would you recommend investments in gold? You are saying 25% of someone’s portfolio, but give us a sense. Would it be on a monthly basis and via what route would you recommend would be the most efficient way in order to invest?

A: For any investment type of investment it should be in the form of a Systematic Investment Plan. So depending on what suits people, one could do it monthly or quarterly and so on. Earlier there were very few avenues through which we could actually make a real investment into gold but now, there are many avenues and each one of them suit a different type of investor.

So people who are comfortable with trading in equities on the exchange for example will find ETFs (Exchange-Traded Funds) very attractive. It is simple and safe. It is secure, and it follows exactly the same pattern as that of buying and selling equities on the exchange. Clients who do not have demat accounts would prefer the mutual fund route, which could be a gold fund or funds, which are available in the market. They are becoming increasingly popular and do not require a demat account.

Other than that there is E-gold which is there on the National Spot Exchange, which has become very popular over the last couple of years. The advantage of E-gold is for clients who want to keep the option of taking the gold in physical form after they have accumulated ‘x’ amount after some period. So the exchange gives this option.

Q: One question with the ETFs, several investors complain that you can’t trade in and trade out of the ETFs and that often it doesn’t seem to go into one-to-one correspondence with the rupee-gold price that you get on an MCX or any other exchange. Is it very difficult to trade in and out?

A: So essentially what we are saying is that there is some tracking error and that is a function of the amount of cash which the fund has to keep for clients who would opt out of the ETF. Having said that that used to be the case and there are several ETFs now like the Gold BeES or the Religare Gold Fund in which you would not have this problem. Therefore it has become more attractive than ever before for clients to trade on this. One can get more or less accurate price on gold.

Q: What is your view on other precious metals such as platinum as well as silver?

A: I think platinum does not seem to have that critical mass to interest people and that is also the reason why it has not taken off even though the prices have been firm.

Silver in India is a story which is still waiting to happen in a big way. For example, we don’t have silver ETFs and the moment they come, they would become very popular. Silver being more affordable compared to gold, more people would take to it. So silver like gold is going to have a strong price trend in the future.