In a recent post on X (formerly Twitter), Nithin Kamath, the CEO of Zerodha, highlighted the accelerated pace of financialisation in India, attributing it largely to the efforts of exchanges, particularly the NSE. “NSE just announced that there are 15 crore investors registered, of which 8 crore are unique…This is vital for India to grow,” he stated.

What Happened? Kamath’s comments come in the context of a record subscription to Sovereign Gold Bonds (SGBs), a secure and hassle-free investment alternative to physical gold, which has seen a consistent rise in interest amid uncertain macroeconomic conditions and a weakening rupee.

The latest tranche witnessed subscriptions to 11.67 trillion units, aggregating ₹6,914 crore, marking the highest since its inception in November 2015.

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Kamath emphasized the significance of such investments, noting, “total SGB issued is ~10% of total gold imports. That’s money staying within the country and not going out.” He pointed out that the physical gold lying in vaults doesn't contribute to the economy, whereas SGBs, predominantly purchased on exchanges, have not only retained wealth within the country but also potentially introduced many to diverse investment avenues.

A change in order? However, the traditional view of gold as a hedge against inflation seems to be shifting, with gold prices remaining relatively stagnant despite multi-decadal high inflation rates in the US, contrasting the substantial returns it offered during similar conditions in the 1970s. Experts attribute this to the strengthening dollar as the US Federal Reserve hikes interest rates to combat inflation.

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