Stocks

Jewellery stocks fail to mimic gold gains

Our Bureau Mumbai | Updated on April 18, 2011 Published on April 18, 2011

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In the last 12 months, though gold prices have risen from $1,150 levels to $1,493 an ounce, jewellery related stocks in India have not kept pace with the price rise, said experts.

Recently C Mahendra Exports, Shree Ganesh Jewellery House, Thangamayil Jewellery and Goenka Diamond and Jewels tapped the market for funds and they have not shown the same growth rate in business as price of gold.

“As international gold prices go up, working capital requirements for these companies also go up,” said the Head of Research of an India brokerage.

“And even if prices do not move in actual Indian rupee terms, purchases are hit because of the negative sentiment attributed to the international price.”

Experts pointed out that Indians buy gold mostly in the form of jewellery. Making charges are more or less constant and do not vary as frequently as gold prices does. To add to this all inventory is marked to market (valued at the day's closing price of Gold) and any profit or loss is booked.

“Margins in this business have steadily come down,” said an analyst. “With net inflow of scrap exceeding the outflow of re-done jewellery, along with the time lag between receipt and final output of redone jewellery, business has slowed down.”

The erosion in disposable income has also played spoilsport, said experts. Food inflation has eaten away purchasing to a significant extent and purchases such as gold have to wait unless the occasion makes it mandatory to buy gold, said experts.

Published on April 18, 2011
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