Jewellery stocks rise on hopes of higher sales

The share price of jewellery companies jumped by up to 12 per cent on Tuesday, amid expectations of better sales and profitability this festive season. Rajesh Exports, India’s leading gold jewellery exporter, rose by a staggering 12.58 per cent, followed by Classic Diamonds, at 10.55 per cent. Gitanjali Gems and Suashish Diamonds rose marginally by 2.61 per cent and 3.40 per cent, respectively.

“Higher gold and silver prices are unlikely to prove a deterrent for jewellery sales, especially when the economy, as a whole, is expected to perform better this year. We are expecting sales to grow 10-15 per cent this festive season, beginning with Dussehra till the new year,” said Rajiv Jain, chairman, Gems & Jewellery Export Promotion Council.

Meanwhile, many jewellers are skewed towards the domestic market for sales growth triggered by a marginal fall in precious metals and stones. In the last few weeks, the prices of rough and polished diamonds have slumped by 10 per cent and 15-20 per cent, respectively, on reduced demand from Indian markets due to the ongoing “shraddha paksha”, an inauspicious 15-day period before Dussehra. In the same period, gold prices also corrected, albeit marginally, from over Rs 28,250 per 10 gram to Rs 27,700 per 10 grams. In dollar terms, they fell from $1,823 on Friday to $1,788 on Tuesday.

“The demand will be driven by India and the Far East. Overall sales in the US have started recovering. Hence, we expect marginal growth in both volumes and value from the US operations this festive season,” said Mehul Choksi, chairman, Gitanjali Gems.

The expected fall in European jewellery sales would not only be compensated by growth in the Indian market but also supersede the overall sales last year, he added.

Prices of rough diamonds surpassed the pre-crisis level in speculative buying about two months ago, as processors booked full to their capacity. But, processing factories are going for an annual 45-day shutdown after Diwali. Hence, cutting and polishing activities are expected to resume only in the last week of December. As a consequence, the demand for rough and polished diamonds is likely to escalate without any increase in supply. Jain sees this as an opportunity for jewellers to cash in on.

“Demand for high grade (for example, the VVS category) diamond is continuously increasing for uses in accessories like watches. Hence, volume-wise, we may not see a substantial growth. But, value-wise, the sales growth would be not less than 60 per cent this festive season,” said Choksi.

Praveen Shankar Pandya, managing director of Diamond India Ltd, a company set up by by jewellers to import gold and rough diamonds on the industry’s behalf, sees India’s import and rough diamond prices being unaffected by De Beer’s move to shift its sorting and grading offices from London to Botswana. India procures and processes nine of the 11 rough diamonds produced through its 35 sightholders and participates directly in tenders from De Beers, the world’s largest diamond miner.