Jewellery Stocks Outlook: Indian jewellery retail stocks continued to remain under pressure after the Government of India increased import duties on gold and silver to an effective 15 per cent from 6 per cent. The revised duty structure includes a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC).
The move is aimed at reducing overseas purchases of precious metals, narrowing the current account deficit, and supporting the rupee as well as foreign exchange reserves.
Citi flags near-term concerns for jewellery sector
Following the government’s announcement, global brokerage Citi raised near-term concerns for the jewellery retail sector, while maintaining a positive outlook on select stocks.
According to Citi, the increase in gold import duty to 15 per cent from 6 per cent is negative for the sector in the short term.
The brokerage highlighted that supply-side risks are more significant than demand-side concerns. Higher gold prices could weigh on consumption demand in the near term.
Citi also warned of a potential slowdown in formalisation due to increased illicit gold arbitrage. In simpler terms, higher duties may unintentionally push a part of the market back into the informal economy instead of making it more organised and transparent.
Additionally, unorganised jewellers may benefit in the near term through inventory gains.
Titan, Kalyan may benefit from inventory gains
On the stock-specific front, Citi noted that companies such as Titan Company and Kalyan Jewellers could benefit from a sudden rise in gold import duty, as it may increase the market value of gold inventory already held under Gold Metal Loan (GML) arrangements.
A Gold Metal Loan (GML) allows jewellers to borrow physical gold from banks instead of purchasing it upfront using cash.
Titan Company Share Price
The share price of the Nifty 50 stock was up 0.3 per cent at Rs 4,103.80. However, the stock had slipped as low as Rs 4,059.10 earlier in the session, reflecting a downside of 0.7 per cent.
Kalyan Jewellers Share Price
The stock showed some recovery and was trading 0.4 per cent higher at Rs 357. However, it had fallen to an intraday low of Rs 350.35 earlier in the session, marking a decline of 1.4 per cent.
Senco Gold Share Price
The stock was trading 0.6 per cent lower at Rs 323.35. Earlier in the session, it had declined as much as 2 per cent.
The stock has fallen over 12 per cent in the last one week. It was trading around 2 per cent lower and near its intraday low during the session.
The government’s sharp increase in gold and silver import duties has created near-term pressure for jewellery retail stocks, with brokerages warning of weaker demand, supply-side risks, and slower formalisation. While organised players such as Titan Company and Kalyan Jewellers may see temporary inventory-related gains, the broader sector sentiment remains cautious amid concerns over higher gold prices and increased illicit gold trade.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
