Actually, gold should be an add-on allocation to your portfolio. Equities in India will continue to be attractive for a variety of reasons. Firstly, the 7.5% GDP growth and the 100bps advantage over China will sustain the interest in India. Secondly, the stable rupee will ensure a steady flow of FII money as the dollar returns will be better protected in INR assets. Thirdly, India offers the best variety of mid-cap and small cap shares, which are actually benefiting from low oil prices and are likely to show the best returns visibility.

Debt will also continue to be attractive as inflation comes under control and the RBI continues its dovish rates policy. As rates go down most of the debt funds are likely to benefit from the capital appreciation. This will keep the attractiveness of debt high. Remember that Indian real rates are very attractive and that is something even large bond funds like PIMCO have admitted to.

The bottom line is that gold can really replace equity or debt but can at best be a supplementary hedge to the overall portfolio. Treat gold accordingly and keep it in a limit of 10% to 15% of your total allocation.