Gold vs Indian Equities: The Critical Decision NRIs Need to Make Right Now

Gold just doubled in five years. Your portfolio tracking app keeps sending notifications about new all-time highs. Your family WhatsApp group is sharing articles about gold's meteoric rise. Friends in Mumbai, Dubai, and Singapore are all asking the same question: should we be buying more?

As an NRI watching from abroad, you're probably feeling the pull. Gold feels safe, familiar, and culturally significant. It's what generations before you invested in. And right now, it seems like everyone who bought gold is winning. But here's what we're seeing at Cambridge Wealth – and why we think NRIs are looking at the wrong opportunity entirely.

The Gold Phenomenon: Understanding What's Really Happening

Let's start with the facts. Gold has had an extraordinary run, and that momentum is creating its own gravitational pull. Rising prices are drawing more investors in. The psychology is powerful: if gold went up yesterday, surely it will go up tomorrow. For NRIs specifically, gold carries additional appeal. You're managing wealth across currencies. You're watching global instability from a distance – geopolitical tensions, currency fluctuations, inflation concerns in multiple countries. Gold promises simplicity: a universal store of value that transcends borders. It's an understandable attraction. But before you allocate more capital to gold, let's examine what you're actually buying.

The Gold Cube: A Thought Experiment

Imagine taking every ounce of gold ever mined in human history and melting it down into a single cube. You'd get something roughly 67 feet on each side – compact enough to fit inside a large building. You could walk around it. Polish it. Admire its gleam under the lights.

Now imagine owning that entire cube. What would it do for you?

The answer is: absolutely nothing. Gold doesn't grow crops. It doesn't manufacture products. It doesn't generate cash flow. It doesn't innovate, adapt, or respond to market demand. It doesn't employ people or create value. It just sits there, inert and unchanging. When you buy gold, you're not buying productivity. You're buying a speculation – the hope that someone else will pay more for that same inert metal tomorrow than you paid today.

The Only Two Reasons Gold Rises

History reveals a clear pattern. Gold appreciates significantly in only two scenarios:

First: Currency debasement. When people lose faith in paper currency, they flee to gold. When governments print money recklessly, when inflation spirals out of control, when the purchasing power of your savings erodes month after month – that's when gold shines.

Second: Political and economic instability. Wars. Government collapses. Financial system failures. The breakdown of normal economic activity. When the world feels like it's falling apart, people clutch gold.

These are the scenarios that drive gold prices higher. You're essentially betting that tomorrow will be worse than today – more chaos, less prosperity, declining productivity, deteriorating institutions.

It's a fundamentally pessimistic investment thesis.

The Progress Paradox

Now, step back and look at human history – particularly recent decades. Despite wars, recessions, and periodic crises, the trajectory of human progress has been remarkably upward:

• Global poverty has plummeted

• Life expectancy has soared

• Technology has revolutionized how we live and work

• Productivity has increased across nearly every sector

• Education and opportunity have expanded globally

Yes, we face challenges. Climate change, geopolitical tensions, economic inequality. But the broad sweep of human progress suggests that betting on sustained chaos and deterioration is, historically, a losing strategy. Pessimism doesn't compound. Progress does.

What Productive Assets Actually Do

Let's contrast gold with productive assets – businesses, real estate, farmland.

Buy a farm, and you can calculate expected returns based on harvest yields, input costs, market prices for crops. The farm produces something of value each season. You can improve its productivity through better techniques, equipment, crop selection.

Buy shares in a quality business like Eicher Motors (the company behind Royal Enfield motorcycles), and you own a claim on:

• Future earnings from motorcycle sales

• The company's brand value and market position

• Innovation in design and technology

• Expansion into new markets

• The compounding effect of reinvested profits

Or consider BKT, which manufactures specialty off-road tires. You're investing in:

• A company serving growing agricultural and construction sectors

• Technical expertise in specialized products

• Global distribution networks

• Relationships with equipment manufacturers worldwide

These assets compound through real, tangible factors: Market Demand × Human Ingenuity × Product Value

All three variables are measurable, predictable, and responsive to effort and strategy. When you buy productive assets, you can run rational analyses. You pay Rs. X today based on the expectation that you'll receive Rs. Y tomorrow – where Y is greater than X adjusted for inflation, increasing your actual purchasing power. The returns aren't based on someone else's fear. They're based on the asset's ability to generate value.

The India Story NRIs Are Uniquely Positioned to Benefit From

As an NRI, you have a particular advantage: you can invest in India's extraordinary growth trajectory while earning income in potentially stronger currencies. The gradual rupee depreciation that concerns domestic investors can actually work in your favor.

But many NRIs are missing what's happening right now in Indian markets. Here's the complete picture:

The Foreign Investor Exodus (And Why It's a Buying Opportunity)

In 2024-25, the Nifty 50 index gained just 6% through October – modest by historical standards. Foreign institutional investors (FIIs) withdrew over $14 billion. Headlines screamed caution. Casual investors got nervous.

But here's what those foreign investors missed – and what smart NRI investors should be paying very close attention to.

1. Corporate Profitability at 15-Year Highs

Indian corporate profits have reached their highest levels in 15 years. The profit-to-GDP ratio for major companies hit 5.2% in fiscal 2024.

This isn't accounting trickery or one-time gains. This represents fundamental strength across core sectors:

• Banking: Improving asset quality, expanding credit penetration

• Oil & Gas: Benefiting from India's growing energy consumption

• Automobiles: Rising middle-class demand, expanding export markets

Indian companies aren't just growing revenue lines anymore. They're converting that revenue into genuine, sustainable profits. The economy is maturing, and businesses are becoming more efficient and profitable.

2. Exceptional GDP Growth in a Slowing World

While major economies struggle, India maintains GDP growth of 6.4-6.5% in fiscal 2025. This isn't artificial stimulus or temporary bounce-back. It's sustained growth driven by:

Robust private consumption: India's middle class continues expanding. Discretionary spending is rising. Consumer confidence remains strong.

Infrastructure investment: Massive government spending on roads, railways, ports, and digital infrastructure is creating multiplier effects throughout the economy.

Demographic dividend: India's working-age population is growing while productivity per worker is increasing.

Compare this to developed markets grinding along at 1-2% growth, and you see why India represents such a compelling opportunity.

3. The Emerging Markets Tide Is Turning

For years, developed market (DM) equities outperformed emerging markets (EM). That trend is reversing:

• EM equities outperformed DM in early 2025

• EM growth is projected at 3.7% in 2025 – more than double advanced economies

• China's market stabilized, with offshore markets returning over 23% in 2024

• The EM-DM growth gap is widening again

This matters enormously for India, the second-largest emerging market. When the EM tide rises, India – with its superior growth fundamentals – benefits disproportionately. MSCI EM earnings growth is expected to accelerate to 17% in 2025. Indian companies are positioned to capture significant portions of that growth.

4. The Inflection Point: Sentiment vs. Fundamentals

This is the critical insight many investors miss.

Current market sentiment is pessimistic:

• That 12% correction spooked retail investors

• Foreign outflows made headlines

• Cautious commentary from brokerages dampened enthusiasm

But the fundamentals tell a completely different story:

• Indian companies delivered 15% annual earnings growth over the past four years

• FDI inflows surged 26% to $42.1 billion in the first half of fiscal 2025

• Corporate balance sheets are the strongest they've been in years

• Capacity utilization is rising, indicating coming capex cycles

This divergence – pessimistic sentiment meeting strong fundamentals – is precisely when smart, long-term capital gets deployed.

Warren Buffett's famous advice applies here: "Be fearful when others are greedy, and greedy when others are fearful."

5. Valuations Have Normalized

After running hot in 2021-2023, Indian market valuations have compressed meaningfully. The recent correction has brought price-to-earnings ratios down from euphoric levels to more reasonable ranges.

This is meeting improving business quality. You're paying less for better companies than you were a year ago. That's the definition of improved value.

6. India's Structural Advantages

Beyond cyclical factors, India offers structural advantages that compound over decades:

Demographics: The world's most favorable population structure – young, growing, increasingly educated and skilled.

Digital infrastructure: UPI, Aadhaar, and digital public infrastructure that's enabling economic participation at unprecedented scale.

Consumption potential: Hundreds of millions of people entering the consuming class over the next decade.

Manufacturing momentum: "China+1" strategies are bringing manufacturing to India.

Domestic champions: Indian companies increasingly competing and winning globally.

These aren't temporary tailwinds. They're structural shifts that will drive growth for decades.

The NRI-Specific Opportunity

As an NRI, you face unique challenges investing in India:

• Compliance complexities (PIS accounts, repatriation rules, tax treaties)

• Account setup hurdles across borders

• Staying informed from thousands of miles away

• Currency management considerations

But these barriers also create opportunity. Many NRIs avoid Indian equities because of these complications. That means less competition for the same returns.

Additionally:

Currency dynamics work in your favor. If you're earning in USD, GBP, EUR, or SGD, you can invest when rupee valuations are attractive. The rupee's gradual depreciation (typically 2-4% annually) is offset by:

• Higher nominal returns in Indian equities (historically 12-15% annually)

• Repatriation at favorable future exchange rates

• Diversification across currency baskets

You benefit from dual growth. Your earning currency appreciates relative to the rupee, while your Indian investments grow with India's economy. This creates a compounding effect.

Tax optimization opportunities. Depending on your residency status and tax treaties, you may have advantages in how returns are taxed.

The Elements of the Coming Bull Run

We believe all the elements for a significant market re-rating are now in place:

✓ Stronger companies – Better managed, more profitable, globally competitive ✓ Rising consumption – Growing middle class with increasing purchasing power ✓ Expanding GDP – Sustained 6-7% growth trajectory ✓ Normalizing valuations – Correction has created entry points ✓ Rebounding EM backdrop – Global capital returning to emerging markets ✓ Policy stability – Consistent economic reforms and infrastructure focus ✓ Digital transformation – Technology enabling business model innovation

The next bull run will reward investors who can distinguish between market noise and the strengthening signal in underlying data.

Gold vs. Equities: The Real Comparison

Let's bring this back to your decision.

If you invest ₹10 lakhs in gold today:

• You own ₹10 lakhs worth of metal

• In 10 years, you hope someone pays more based on their fear

• You receive no income, no dividends, no compounding

• Your returns depend entirely on the next buyer's psychology

• You're betting the world becomes less stable, less prosperous

If you invest ₹10 lakhs in quality Indian equities today:

• You own claims on businesses generating real profits

• Those businesses invest in growth, innovation, market expansion

• You receive dividends that can be reinvested

• Profits compound year after year through productive activity

• Your returns are driven by actual value creation

• You're betting on India's growth, innovation, and rising prosperity

Historically, Indian equities have delivered 12-15% annualised returns over long periods. Gold has delivered roughly 8-10% over similar timeframes – but with much higher volatility and no income generation.

At Cambridge Wealth, we work extensively with NRI investors navigating exactly these decisions. Our current recommendation is clear: Maximise allocation to select high-performance Indian equities over the next 2-3 quarters.

Not gold. Not defensive cash positions. Not waiting for "perfect" entry points that never arrive.

Quality Indian equities, carefully selected for:

• Strong management teams

• Sustainable competitive advantages

• Exposure to India's growth drivers

• Reasonable valuations

• Proven track records of capital allocation

We're optimistic – about the world, and especially about India. Our analysis of economic and social indicators tells us India tomorrow will offer far better opportunities than India today.

This conviction in productive growth makes us bearish on gold and bullish on equities.

The Question for You

The Indian equity market is setting up for what we believe will be a significant bull run. The fundamentals are in place. The valuation correction has created opportunity. The growth trajectory remains exceptional. The question isn't whether India will grow – the data makes that clear.

The question is: Will you be positioned to benefit from that growth? Will you be holding gold, hoping fear rises? Or will you own pieces of the businesses building India's future?

As an NRI, you have the capital, the global perspective, and the ability to invest across markets. The opportunity is there. The timing is favorable. The structural growth story is intact.

Ready to explore what this means for your specific situation?

At Cambridge Wealth, we specialise in helping NRIs navigate Indian market investments with the compliance expertise, portfolio structure, and strategic thinking you need. We handle the complexities so you can focus on the opportunity. Whether you're just starting to invest in India or looking to optimise an existing portfolio, we can help you position for the growth ahead. Let's discuss your portfolio strategy. Because the best time to invest was yesterday. The second-best time is now.