Gold vs stocks: Why equities are better option; fixed income, InvITs outlook

Rising volatility and weakening correlations with other asset classes have reduced gold's safe-haven appeal and predictive certainty, ASK Private Wealth said on Tuesday. The wealth manager turned 'Overweight' on equities, citing strong earnings growth, while tactically turning 'Underweight' on gold.

ASK said gold delivered strong returns over the past two years, supported by central bank buying, lower interest rate expectations, resilient demand, ETF inflows and geopolitical uncertainty.

"However, it has become increasingly volatile in recent months, raising questions about its safe-haven characteristics. Its correlation with other asset classes has also weakened significantly. Moreover, the cyclical nature of these correlations has become more evident, reducing their reliability as predictors of future gold prices," ASK said.

Gold is expected to underperform in an environment of rising interest rates. Regulatory restrictions may also play a role in the domestic market, it added.

"Rising interest rates too weigh on the asset class prompting our underweight stance on it," ASK said.

In contrast, ASK said domestic growth indicators remain resilient, while earnings momentum has continued in the Q2 results declared so far. Domestic flows provide downside protection, while equity valuations offer a margin of safety.

"For once most of the major events that weighed on the market for 2026 so far have played out to a large extent. While that doesn’t foreclose the possibility of steeper correction for longer period as also the possibility of breakout of new adverse events, we feel the time has come for constructive rebuilding of portfolio with an increased risk seeking," ASK said.

Nifty is trading 14 per cent below its peak, while valuations have corrected closer to historical averages. In historical context, a drawdown of this nature is well within the realm of an equity market correction. Its extent, whether measured by the index level or PE correction, would rank somewhere in the middle of the 15 largest such episodes the market has witnessed since the early 2000s, ASK said.

"We have thus turned overweight on equities while remaining neutral within components of it including global/domestic, EM/DM and large/SMID cap," ASK said.

ASK said it would continue to look for opportunities across sectors based on their growth prospects, earnings delivery, valuation comfort and portfolio positioning to achieve the best risk-optimised outcome. Financials have long been a preferred sector, while the wealth manager would be a tad cautious on themes that have played out sharply over a short period, it said.

"Domestic economy amidst all these show strong resilience as seen from various leading indicators. Corporate performance remains robust from the early results trend of the current quarter. Domestic flows have reached new high providing significant downside protection amidst selling pressures from FIIs. Valuations too have corrected to their long-term average level adding significant margin of safety," ASK said.

Apart from gold and equities, ASK turned 'Overweight' on InvITs, citing their ability to withstand the interest rate cycle better.

"Rising inflation risks, higher fiscal pressures and the prospect of elevated global yields point to tighter rates ahead, keeping us underweight Fixed Income. The yield curve too has shifted up reflecting these changes," ASK said on fixed-income products.