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Markets may be lethargic but jewellery stocks are on fire.
The biggest gainers in this pack feature Gitanjali Gems and Shree Ganesh Jewellery House, up 20 per cent, TBZ which is up 15 per cent, Tara Jewellers and Thangamayil Jewellery, up around 9 per cent in trade so far. Further down the gainers list at 5-7 per cent are Titan Company, PC Jewellers, Tara Jewellers and Rajesh Exports.
What is spurring these stocks is the Reserve Bank scrapping the 20:80 gold imports rule last Friday, having partially relaxed it earlier this year. This, together with easing of gold-on-lease model, also earlier this year, means a better raw material availability for jewellery companies.
Domestic players
The 20:80 gold import rule, which was put in place last July, required nominated banks and agencies to export at least 20 per cent of their gold imports. This was to clamp down on imports to curb the current account deficit. These measures raised domestic gold premiums, pressuring jewellers’ margins besides tightening raw material supply.
The complete relaxation in this rule is good news, especially for domestic jewellers who do not have a high export component such as Titan Company, Thangamayil, PC Jewellers and TBZ. Shrinking domestic gold premiums can prop up margins. The eased import rules jives well with international gold prices trending steadily lower. Finally, quite apart from a cheaper and easier input scenario, consumer demand may also receive a shot in the arm with lower gold prices.
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