Domestic jewellery demand in the September quarter was down 2 per cent compared to the same period in the last fiscal, due largely to a high base last year.

The industry registered 70 per cent growth in the same quarter last fiscal, due to pent-up demand post lifting of the pandemic-induced restrictions.

The performance exceeds ICRA’s expectations of an 8 per cent year-on-year contraction, and was driven by urban demand recovery, aided by range-bound prices.

However, the domestic jewellery industry is estimated to have registered healthy growth of 60 per cent in the September quarter, against that in pre-Covid levels (Q2 FY’20).

Going forward, while some contraction is expected in the current quarter, the industry is likely to register 12 per cent growth on the back of steady wedding and festive demand. Demand in this fiscal is estimated to be 35 per cent higher than in FY2020.

Kaushik Das, Vice-President, ICRA said while the jewellery sector has recorded healthy sales in the Dussehra and Diwali seasons, factors such as high domestic inflation, cautious consumer sentiment towards discretionary spending and a weak rural economic recovery due to erratic monsoons, are likely to constrain demand growth in the near term.

Nevertheless, he said the demand outlook in the medium to long-term remains favourable.

ICRA expects contraction to moderate to 10 per cent in the December quarter, against the earlier expectations of 15 per cent contraction in the quarter, on the back of steady demand witnessed in the festive season and favourable indications for the upcoming wedding season.

Industry growth is likely to remain flat in the March quarter at 3 per cent owing to inflationary concerns.

Vipin Jindal, Assistant Vice-President, ICRA said with healthydemand in the recent past, organised players had re-initiated their expansion plans, which is expected to gain momentum in the coming quarters.

The margins of organised retailers is likely to remain higher than the average levels of 6.5 per cent seen over the last decade, and is expected to stabilise at around 7-7.5 per cent over the medium term.

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