Jewellery shares extend fall; Titan Company hits 52-week low

Titan Company, Tribhovandas Bhimji Zaveri and PC Jeweller were down between 3% and 5% on the BSE.

Shares of gems and jewellery companies extended losses for the seven straight trading session after the Government of India on November 8, 2016 announced its decision to cancel the legal tender character of high denomination bank notes of Rs 500 and Rs 1,000 issued by the Reserve Bank of India (RBI).

Titan Company, Tribhovandas Bhimji Zaveri (TBZ) and PC Jeweller were down between 3% and 5% on the BSE in intra-day trade.

At 11:29 am, the S&P BSE Consumer Durable index, the largest loser among sectoral indices, was down 2% or 214 points at 10,649, as compared to 0.20% rise in the S&P BSE Sensex. In past seven trading sessions, the consumer durable index has fallen 15% against 4.8% decline in the benchmark index.

“Demonetization scheme has deteriorated the short to medium term outlook of gems & jewellery sector. However, long term outlook is positive as over the many years, people will hide their black money in the form of precious metals like gold, silver instead of currency notes,” Choice Research said in a report.

Titan Company hit a 52-week low of Rs 299, down 5.4% on the BSE in intra-day trade. The stock of Tata Group Company has fallen 19% from Rs 371 on November 8.

According to JP Morgan, in the jewelry space, Titan could feel the heat in the short term as jewelry/watch demand could be affected - Q2 demand was impacted adversely by continued government push towards regulation (PAN card requirement impacted urban demand) and accountability (clamping down on undeclared income). Impact on gold prices however needs to be monitored too - behaviorally investors going forward may keep less cash and more holdings in alternate asset classes like gold.

“Medium term we believe this could be a significant positive for Titan considering it stands to gain from unorganized players who may become less competitive with the need to be more compliant with regulations,” the foreign brokerage said in a report.