SGB vs Sensex: Ahead of gold bond redemption, which one shines brighter?
sovereign gold bond (SGB 2015-I) goes for redemption on Thursday. Its returns over the last eight years stand at 148%, which includes 20% in interest income accrued over this period.
This is marginally lower than 152% returns delivered by the BSE Sensex in this time but scores ahead in terms of tax benefits.
The story does not take into account gains for investors from the exemption of long-term capital gains (LTCG) tax for holding it for the maturity period of 8 years against 10% that equity investors would pay as LTCG over an income of Rs 1 lakh if they choose to book profits on the redemption day.
An ETMarkets analysis of the stocks with market cap above Rs 10,000 crore finds 168 stocks which have given multibagger returns during this period. Of this, only 19 stocks have given lower returns than gold bonds.
While the Reserve Bank of India (RBI) has set the redemption price at Rs 6,132 per gram which is a 128% (Rs 3,448) premium over the issue price of Rs 2,684 per gram, the interest income is calculated over the issue price at 2.5% per annum for the maturity period of eight years.
The first tranche of the SGB was launched on November 5, 2015, and was available for subscription till November 20, 2015.
It was issued on November 30, 2015. The SGB was listed on the NSE on June 13, 2016, and the price of 1 gram of gold at that time was Rs 2,686.
On the day of issue of the SGB 2015-I, Sensex recorded a closing of 26,145.67 while on SGB's listing date, Sensex settled 26,396.77.
Its returns as on Friday, November 24, 2023, stood at nearly 150%.
SGB Vs Sensex Stocks
Among the Sensex stocks, Tata counters have trumped SGBs. Titan leads the pack with 790% returns followed by Tata Steel (474%), UltraTech Cement (204.44%)
