Nifty-Gold Ratio Narrows to 1.5: Implications for Indian Equities and Gold Prices Explained

Equities May Be Oversold as Nifty-Gold Ratio Slips to 1.5

The Nifty 50-gold ratio, a key indicator that tracks the relative movement of equities and gold, has narrowed further to 1.5. This suggests that equities may be oversold and could be poised for a rebound. As of March 30, considering Nifty's level and gold rate in India, the Nifty-to-gold ratio has declined further to 1.5.

Historically, whenever this ratio falls below 2.5, the market benchmark sees a healthy upside. While the movement of gold and equities depends on various macroeconomic and other factors, the Nifty-gold ratio analysis is a factor that market participants might find difficult to ignore.

According to experts, the narrowing ratio of Nifty and gold shows that the Indian stock market may be oversold and equities could be deeply undervalued relative to gold. Ajit Mishra, SVP of Research at Religare Broking, notes that with the Nifty-gold ratio slipping toward 1.5, we are entering a zone where equities look deeply undervalued relative to gold—historically a setup that has preceded powerful multi-year equity outperformance rather than panic.

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Harshal Dasani, Business Head at INVasset PMS, highlighted that the Nifty-gold ratio is flashing a signal that markets often ignore at their own peril. Dasani pointed out that since the early 1990s, equities and gold have delivered broadly similar price returns. While equities tend to dominate narratives around wealth creation, this parity highlights gold's quiet compounding power, especially during periods of currency weakness, inflation spikes, and global uncertainty.

According to Dasani, the recent sharp fall in the ratio suggests that gold is once again outperforming equities, driven by geopolitical risks, elevated crude prices, and a weakening rupee. This does not automatically imply a bearish outlook for equities, but it does reflect a shift in investor preference toward safety.

"The ratio is best seen as a relative valuation indicator rather than a timing tool. When it declines toward historical lows, equities begin to look cheaper versus gold, but that opportunity only plays out if macro conditions stabilise," said Dasani. "If inflation cools, crude prices ease, and earnings visibility improves, equities can regain leadership. Until then, gold's resilience is likely to persist. For investors, the message is clear: diversification is not optional, and asset allocation—not asset prediction—remains the real driver of long-term returns," Dasani said.

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Note: The above table is a comparison of the yearly returns of Nifty and gold when the Nifty-gold ratio is above 2.5 and below 2.5.