Silver rally likely to end soon, investors should rotate profit to Indian stocks: Report

Investors Advised to Rebalance Portfolios Amid Silver's Rising Valuations

A recent report from WhiteOak Capital Mutual Fund suggests that investors should consider booking profits on silver and rebalancing into diversified Indian equity funds or blue-chip stocks.

Why Trim Precious Metals Allocation

• Silver's current valuation is over-extended relative to historical periods.
• The metal's huge outperformance relative to gold often signals the final speculative phase of a rally.
• Silver's current premium leaves it vulnerable to a sharp correction.

The report notes that when silver outperforms gold with high velocity or parabolic moves, it often signals the final, speculative stage of a run; one that historically ends against investors' best interests.

The Gold-to-Silver Ratio: A Key Indicator

The current Gold-to-Silver ratio has collapsed to about 46:1 versus a 10-year average near 80:1, the report said.

• When the ratio drops below 50:1, silver is no longer considered cheap.
• A ratio this low has preceded a mean reversion where silver prices corrected significantly faster relative to gold.

The Case for Indian Equity Funds or Blue-Chip Stocks

A weakening Rupee is often used to justify holding metals, but history shows it cannot save the investor from a speculative burst.

• Nifty 50 companies reinvest profits to grow and reward investors with dividends and capital appreciation.
• The Nifty 50 (TRI) has matched or exceeded gold's CAGR of around 13.2 per cent since inception.
• Nifty 50 provides far superior liquidity compared to holding physical metal.

Expert's View

"An ounce of gold or silver produces no cash flow. In contrast, the Nifty 50 companies reinvest profits to grow, and reward investors by returning cash (in the form of dividends), as well as through capital appreciation," the fund house shared its view.

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