Consumer price inflation (CPI) in May 19 has been 3.05% which is very low and expected to remain so in future. Reserve Bank of India has made a forecast of 2.9-3.3% inflation (CPI) in rest of 2019-20 financial year. In this scenario return on investment are bound to come down as we cannot have such a high real return in the economy. Real return is return over inflation.
Historically gold has provided 2% real return, bank deposit 2.5% and BSE 30 index 8.4%. If we expect inflation to remain around 3% as per RBI forecast Absolute return on gold, bank deposit and index will be 5%, 5.5% and 11.4%. We should expect bank FD rates to reduce further. Even equity investor should moderate their expectation of return to 10-12% which will still be best return in any asset class.