Looking at Returns in a New Way
There is some very interesting data that most investors never look at. Many times, we check stock returns only in rupees. But this data shows HDFC Bank’s performance over the last 30 years in gold terms, not in rupees. This means the stock price is divided by the price of gold. This method helps us see the real value of growth, not just the number printed on the screen.
How the Money System Affects Asset Prices
Modern money systems are built on paper currencies like the rupee and the dollar. Over time, more and more money is created. When money supply rises, asset prices also tend to rise. This creates a feeling that people are becoming richer. This is called an artificial wealth effect. Prices go up, and people feel happy seeing their investments grow. But this growth may not always mean real wealth is increasing.
Why Gold Is Used as a True Measure
Gold is often called real money because its value does not depend on printing more currency. When we compare assets against gold, we get a clearer idea of whether real value is being created. If a stock rises in rupees but stays flat against gold, it means the gain is mostly because of currency weakness, not true growth.
What HDFC Bank Data Shows
When HDFC Bank is compared with gold, the picture changes. Since 2006, HDFC Bank has not moved much against gold.
In simple words, it has mostly stayed at the same level. This does not mean HDFC Bank is a bad company. It only means that its real outperformance versus gold has been close to zero.
Big Difference Between Rupee and Gold Returns
In rupee terms, HDFC Bank has risen around 2500% since 2006. This looks amazing and makes investors feel very successful. But in gold terms, the increase is only about 13%. This shows that the common belief of earning 20% every year in real terms may not be correct.
How Investors Should Think
To feel good, you can look at returns in rupees. But to understand real wealth creation, you should also look at returns against gold. This gives a more honest picture of how much value your investment has truly created over time.
