Jewellery stocks seem to be losing glitter amid a weak rupee and domestic macroeconomic factors. The six-month trend shows a 4-48 per cent decline since Diwali, in prices of most jewellery company stocks.
Leading jewellery makers, including Gitanjali Gems, Rajesh Exports and Shree Ganesh Jewellery House, have witnessed a slide on the Bombay Stock Exchange (BSE) since last year. According to equity analysts, macroeconomic factors such as rupee fluctuation, uncertainty over government policy regarding excise duty on non-branded jewellery and high inflation in the domestic market have dented jewellery consumption in the country, thereby affecting the performance of jewellery makers.
Gitanjali Gems closed on the Sensex at Rs 332.55 on Tuesday, down 10.2 per cent since October 25. Similarly, Renaissance Jewellery closed at Rs 83.55, having shed 14.7 per cent. Kolkata-based jewellery maker and exporter, Shree Ganesh Jewellery House lost 48 per cent and closed at Rs 78.85, while Su-Raj Diamonds and Jewellery remained flat and closed at Rs 44.8.
“Business was low because of high gold prices in the past six months,” said Rajesh Mehta, chairman and managing director, Rajesh Exports. “But we have maintained stability in operations by focusing on retail business. Our revenues have grown 30-35 per cent quarter-over-quarter and we expect the same trend for the next five years,” he added. The company recently opened 20 jewellery showrooms in Karnataka. However, the shares fell 2.36 per cent to close at Rs 133.4. It has declined 9.3 per cent since October.
“Jewellery consumption has slowed due to several macroeconomic factors. The preference of gold as an investment is rising over demand for jewellery. This may hamper jewellery makers, thereby affecting their stock valuations,’ said Rikesh Parikh, vice-president (equities), Motilal Oswal Securities.
Industry statistics put gold imports at $54.5 billion during the April-February 2011-12 period — the highest in the recent past. In 2007-08, gold imports stood at around $15 billion, which rose to $22 billion in 2008-09 and $30 billion in 2009-10. In 2010-11, India’s gold imports stood at around $33 billion.
Internationally, gold prices remained volatile during the past six months. Prices declined to $1,550 per ounce during January 2012, but soon soared in the range of $1,650-1,700 per ounce.
In India, gold prices have moved up from around Rs 26,198 per 10 gm in October 2011 to a record high of Rs 29,500 per 10 gm in November 2011. To bring gold imports under control, the government attempted to increase import duty three times since December 2011. In the Union Budget declared in March, import duty was doubled from two to four per cent. According to Parikh, this measure would discourage jewellery makers.
“During the October-December quarter, gold prices touched an all-time high of around Rs 29,500 per 10g in India and $1920 an ounce, internationally. This increased the import cost for jewellery makers. Margins remained under pressure and stocks were affected,” said Naveen Mathur, associate director (commodities & currencies), Angel Broking.
Industry insiders maintained that gold prices may continue to stay firm due to the weak rupee. The rupee touched 52.8 against the dollar on Tuesday — the lowest since January. “Input costs will remain high for jewellery makers for some time. The rise in duty will also play deterrent,” added Mathur.
Amid uncertain currency movements and high raw material prices, experts see major concern for volume growth in the gold jewellery business.