Jewellery stocks came under sharp selling pressure on Wednesday, 13 May, after the government raised customs duties on gold and silver to 15% from 6%, a move expected to dampen demand and weigh on sector margins.
Shares of key players such as Kalyan Jewellers India, PC Jeweller, P N Gadgil Jewellers, Senco Gold, Thangamayil Jewellery, and Titan Company declined up to 6%, reflecting concerns over higher input costs and potential demand slowdown.
Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, said that post the appeal by Prime Minister Narendra Modi urging citizens to avoid buying gold for a year, jewellery stocks have remained under pressure. Until there is any positive development or respite, this underperformance is likely to continue.
“One should avoid aggressive bets in the space for now; however, upon any positive trigger, counters like Titan Company and Senco Gold could outperform, as these stocks were showing relative strength prior to the announcement,” advised Bhosale.
Further, Ruchit Jain, Head – Equity Technical Research, Wealth Management, Motilal Oswal Financial Services, added that Jewellery stocks have corrected amid worries over a possible reduction in demand due to the rise in duties and PM’s appeal to citizens to reduce gold buying. This could keep sentiment negative in the near term, so one should adopt a wait-and-watch approach for the time being.
According to a Business Today report, shares in the jewellery sector have faced challenges this week amid growing concerns about possible government actions on gold imports, as Kotak Institutional Equities noted. These concerns have now come to fruition, with the government implementing a 10% basic customs duty and a 5% Agricultural Infrastructure and Development Cess (AIDC) on gold and silver, raising the total import tax from 6% to 15%.
This decision aligns with earlier market expectations. Business Today reported that Nomura had noted the likelihood of restrictions on non-essential imports, such as gold, including a potential increase in duties. The brokerage also noted that shipments of gold have been delayed at customs since March due to administrative issues.
