Inflation Hedging Properties of Stock Market and Real Estate Investments in Mumbai: A Comparative Analysis

Abstract

This paper examines the inflation hedging capabilities of stock market and real estate investments in Mumbai, India's financial capital. Using historical data from 1991 to 2022, we analyze the performance of the BSE Sensex and Mumbai property prices relative to inflation rates. Our findings indicate that while both asset classes have provided long-term returns exceeding average inflation, real estate has demonstrated more consistent short-term inflation hedging properties. The BSE Sensex showed higher volatility and a slight negative correlation with inflation, aligning with previous studies on the Indian market. In contrast, Mumbai's real estate market exhibited a moderate positive correlation with inflation and more frequent outperformance of inflation rates. The paper contributes to the existing literature by providing a focused analysis of Mumbai's market and offering insights into the comparative inflation hedging effectiveness of stocks and real estate in an emerging market context. These findings have implications for investors seeking to protect their portfolios against inflation in India's dynamic economic environment..