PM Modi advises against buying gold: What alternative assets can investors consider? Experts weigh in

Prime Minister Narendra Modi on Monday urged citizens to boycott gold purchases for the next one year, saying the country should focus on reducing non-essential imports, strengthening the economy and conserving forex reserves. The statement has shifted attention towards other investment options that can potentially act as hedges during periods of inflation, market volatility and economic uncertainty.

The PM’s call assumes significance, especially as gold has traditionally been viewed as a safe-haven asset in India, often witnessing higher demand during uncertain economic conditions and geopolitical tensions. Apart from that, gold is also a preferred savings and investment option for many Indian households. Here are some alternatives to the yellow metal, suggested by experts.

Which assets can investors choose instead?

According to three experts who spoke to Mint, for those seeking alternative assets that can act as a tactical bet against inflation and market volatility, such as gold, there are multiple instruments to consider. These include:

• Debt instruments like RBI Floating Rate Bonds: They offer a government-backed yield.
• REITs and InvITs: They provide real-asset exposure with dividend income.
• Equity mutual funds: Doing SIPs in defensive sectors can compound wealth over time.
• Digital assets like Bitcoin: Crypto such as Bitcoin and Ethereum are increasingly being held as a macro hedge in diversified portfolios.

“In the current scenario, what geopolitics really does is accelerate de-dollarisation and a search for scarce, portable stores of value, which is precisely the thesis underpinning both gold and digital assets. For Indian retail investors, a layered approach across these asset classes is more robust than betting on any single one,” according to Prateek Gupta, Head of Business at Mudrex.

Meanwhile, Ankur Punj, Managing Director & Business Head at Equirus Wealth, said that shifting investments from gold to other asset classes requires a disciplined, phased approach to preserve capital and capture growth potential amid inflation and uncertainty. “Key is maintaining some gold exposure (5-10%) for its unique safe-haven role while reallocating gradually via SIPs to avoid timing risks,” he suggested.

Do gold ETFs add up to India’s import bill?

While many investors may consider gold ETFs (exchange-traded funds) as a viable safe-haven asset as they track the price movement of gold, experts say that they may not be any better than investing in physical gold.

“Gold ETFs are not import-neutral because SEBI requires AMCs to hold physical gold as backing; so higher retail inflows into Gold ETFs do push AMCs to import more gold, indirectly adding to India’s import bill,” said Priyank Sharma, a SEBI-registered research analyst.

When investors buy gold ETFs, fund houses acquire physical gold to back those units. While these asset management companies increasingly source gold from domestically available stock instead of placing fresh import orders, the overall impact on imports still persists. Sharma explained that AMCs primarily buy from domestic suppliers, but if the demand rises sharply and local availability falls short, additional gold may still need to be imported. meaning the demand eventually contributes to the country’s overall gold imports.

“If the concern is the current account deficit, sovereign gold bonds (SGBs) are clearly the better choice as no physical gold is imported against your investment, and you still earn gold-linked returns plus 2.5% annual interest, with full capital gains exemption at maturity,” he said.

How can international exposure help investors during uncertainty?

Spreading investments across multiple countries and regions reduces centralised exposure to any single geopolitical event. For Indians, international diversification also provides a natural rupee depreciation hedge, according to Gupta. “US dollar-denominated assets gain value in rupee terms when the currency weakens, as it does during external stress episodes like the current one,” he said.

Though this may benefit an individual investor’s portfolio during times of uncertainty, from a broader economic perspective, encouraging domestic investment over international allocation could help support the rupee.

“Overseas investing also means converting INR into foreign currency, which puts pressure on forex reserves. So if the larger objective behind PM Modi’s comment is to reduce external pressure on the economy and support the rupee, then shifting from gold to international assets does not fully solve that concern,” said Harendra Zatakia, a Sebi-registered investment advisor and founder of Wealth Aligned financial advisory.

“Domestic investments in Indian equities, REITs and bonds can also provide meaningful diversification across asset classes while keeping savings within the Indian financial system. They support local economic growth and are structurally more supportive for the rupee over the long term,” he said.

If you still seek exposure to international assets, Sharma suggests that one should allocate 10-15% of their portfolio to international funds tracking the S&P 500 or Nasdaq, as it provides dollar exposure and naturally hedges against rupee depreciation. “It also reduces dependence on Indian market cycles. SEBI’s overseas investment caps mean not all international funds are open at all times, so check availability before investing,” he explained.

Additionally, Gupta noted that cryptocurrencies remain among the most globally liquid diversifier assets available to retail investors as they trade around the clock and have no geographic borders. “Its fixed-supply assets are increasingly held as a hedge against fiat currency debasement across multiple economies simultaneously’ he said. These characteristics provide them with a meaningful diversification attribute that traditional cross-border instruments don’t usually offer.