I was playing around with the Forex graph tool at Economist.com and plotted the chart below:
The Indian rupee has lost ~60% of its value versus gold since late 1999; the BSE Sensex-30 market index rose from 5000 to 14000 during the same period - a gain of 180%. BUT, if we were to measure the Sensex in terms of gold, it has gone up only 12% since 1999 !!
Makes you wonder.
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April 20th, 2007 at 1:49 pm
Kaushik,
Wouldn’t a similar amount invested in FDs in India give u a superior return ?
60% over 7 years doesnt sound great isnt it ?
Please advise.
April 20th, 2007 at 2:06 pm
Well, the 2000-2007 annual return for the Sensex works out to ~16%. If you had invested in FDs, you would have made even lower annual returns, while suffering from the same extent of rupee devaluation.
April 21st, 2007 at 11:13 pm
I dont understand this point at all. My bad !!
Could you pls tell me what is the ANNUAL return on GOLD from the 2000-2007 period
I think the 60% is over a 7 year period…which doesnt sound great ?
April 22nd, 2007 at 8:05 pm
Dr Dan: Think of it this way - in 2000, the rupee was worth “1 unit” of gold while the Sensex was at 5000. Now the rupee is worth “0.4 units” of gold, while the Sensex is at 14000.
Thus, in terms of gold, the Sensex went from 5000 (1 * 5000) in 2000 to 5600 (0.4 * 14000) in 2007. That’s a 12% increase OVER the entire period, not annually!