The Government’s efforts to curb the import of gold and some of the financial institutions’ decisions to curb lending against sale of gold and gold ETFs is having a negative impact on the shares of companies involved in the gem and jewellery industry with two stocks falling to 52-week lows and one shedding nearly 20 per cent of its value on the NSE today.
The losing streak did not leave even NBFCs lending against gold jewellery with Manappuram Finance stock falling to a new yearly low.
The GoI’s move to make gold imports less attractive in the context of current account deficit has triggered fears that gold imports might decline which might affect the prospects of the entire jewellery industry, though gold imports meant for exports of finished ornaments was not expected to be affected by the Government’s decision.
Gitanjali Gems Ltd was the worst-hit among the industry stocks, losing Rs 100.20 or 20 per cent to Rs 400.90 with the counter locked in lower circuit with 10.64 lakh shares offered for sale with no buyers.
The rapid succession in the steps the Government had taken to moderate gold consumption has seen the stock losing about 40 per cent of its value in just two months after touching a 52-week high of Rs 649.70 on the NSE on April 23.
Two other stocks — Shree Ganesh Jewellery House(I) Ltd and PC Jeweller Ltd — crashed to new 52-week lows today.
Shree Ganesh Jewellery shares lost Rs 7.75 or 9.48 per cent to Rs 74. It had fallen to a new yearly low of Rs 73.70 today before making a mild recovery. The company is engaged in jewellery exports but investor concern seems to have ignored this aspect.
PC Jeweller stock shed Rs 9.70 to Rs 88.25 and this stock dipped to a new 52-week low of Rs 81.80 before making a pullback. Shares of Mumbai-based Tribhovandas Bhimji Zaveri Ltd were down by Rs 25.55 at Rs 170.50.
Gainers' list
There were some green spots, though Titan Industries Ltd , one of the most visible stocks in the sector, was trading at Rs 223.65, up by 60 paise and the stock had recovered from its 52-week low of Rs 201 that it had touched on June 13. The trading volume was a high 30.81 lakh shares.
Madura-based Thangamayil Jewellery was also in the green, gaining 35 paise to trade at Rs 202.40
A NBFC company involved in lending against gold jewellery — Manappuram Finance Ltd — was also hit by the general bearish sentiment towards the sector falling to a new low of Rs 12.05 before marginally recovering to Rs 12.15, a loss of Rs 1.15.
Suspension of gold sales
It was only last week that Reliance Capital Ltd announced suspension of sale of gold while its commercial finance division would stop lending against gold as security and its MF arm would suspend new subscriptions to gold savings fund, though existing SIPs would be allowed.
The company said its decisions were in solidarity with the Government move to curb gold imports.