ABSTRACT
This study looks at and compares the risk-adjusted performance of two major asset classes in India: equity, represented by the Nifty 50, and gold, from January 2010 to July 2025. It uses monthly return data and combines traditional performance metrics like the Sharpe Ratio with the Fama-French Three-Factor Model. This approach offers a broader view of how assets behave. Such dual analysis is not often explored in India, where gold holds cultural and economic importance in investment portfolios.
The findings indicate that the Nifty 50 provided slightly higher average returns, but these came with increased volatility. Gold showed marginally better risk-adjusted performance, with a higher Sharpe Ratio, highlighting its protective role during market downturns. The CAPM results confirmed gold's negative beta, which reinforces its value as a hedge. The Fama-French regressions also showed that gold's returns are mostly independent of equity-related risks. This was indicated by low explanatory power (R²) but a statistically significant positive alpha, suggesting non-equity factors, such as inflation and geopolitical risks, influence its returns.
These findings have both theoretical and practical implications. They emphasize gold's diversification benefits in emerging markets and suggest that Indian investors can enhance portfolio efficiency by holding a 10 to 15% allocation to gold along with equities.
