Diamond prices up by 2-5% in three weeks

Buyers disregard lean season, buy ahead of GST rollout, which would make jewellery costlier by 3-4%

Despite weak demand ahead of the new season, rough and polished diamond prices have risen 2-5 per cent across all varieties during the past three weeks.

Diamond processing activity in India, which was down early this year, revived later with the positive outlook on the Indian economy. Also, wedding season demand coupled with stagnant gold prices boosted jewellery demand from local consumers.

Normally, jewellery demand season ends with the closure of wedding dates around May 31. Rural demand, which makes up around two-third of India's jewellery consumption, also fades with the onset of the monsoon as farmers move to buy seeds and fertilizers for sowing kharif crops. This time, however, consumers continued buying ahead of Goods and Services Tax (GST) rollout on fears that jewellery would become costlier once the tax is implemented.

"The domestic demand for rough and polished diamond has been fairly good in the past few weeks. Hence, the prices of both rough and polished diamonds have risen by 2-5 per cent across all categories," said Pravin Nanavati, Joint Secretary, Gujarat Heera Bourse.

The price rise during the current lean season is unusual, as consumers normally stay away from fresh purchases during this period due to other preferences. Likewise, in the United States, the largest consumer of precious ornaments with a global market share of 42 per cent of the world production, jewellery demand remains subdued before consumers start coming back to the showroom in July, after which robust demand continues throughout the calendar year.

"Indian consumers normally start preparations with new designs and collections in July which marks the beginning of the season. But, jewellery demand remained fairly good both in India and overseas. Meanwhile profitability of diamond processors is under tremendous pressure. Hence, they have adjusted the price to claim profitability," said Praveen Shankar Pandya, Chairman, Gems and Jewellery Export Promotion Council (GJEPC).

Meanwhile, with global economic uncertainty reducing gradually, consumers are coming back to buy luxury items, including precious ornaments. Consequently, India's gems and jewellery exports surged 8.95 per cent for financial year 2016-17 on recovery in demand from the US, Hong Kong and the UAE, the three markets accounting for over 75 per cent of India's overall shipment of precious ornaments by value. Exports continued to remain in positive territory thereafter as well.

"The US economy is on the revival path after witnessing a slowdown in the past few years. The consumer sentiment is positive and buyers in the United States have started coming into the market for the purchase of new jewellery. But, India needs to do some promotional activities for the rapid growth in jewellery exports as diamond miners like De Beers and Alrosa cannot do it alone. We, however, estimate India's gems and jeweller exports to move up by 10 per cent for the financial year 2017-18," said Pandya.

Interestingly, global rough diamond miner De Beers has posted over 20 per cent decline in online rough sales so far this year which, according to industry officials, is because of lower output.

Mehul Choksi, chairman and managing director of Gitanjali Group, the producer of leading jewellery brands like Nakshatra, Gili to name a few, has recorded an increase jewellery sales this season with huge promotional initiatives including discounts on making chargers.