Jewellery stocks up on expectations of better sales this season

While share price of Gitanjali Gems shot up by 7.39%, that of Shantivijay Jewels jumped 4.93%

Share price of gems and jewellery companies shot up by upto 7% on Monday due to estimates of an improvement in margins this festive season.

While share price of Gitanjali Gems shot up by 7.39% to Rs 55.25 apiece, that of Shantivijay Jewels jumped 4.93% to Rs 61.75 apiece. Leading players in this sector, Rajesh Exporters and Shrenuj & Co also reported a jump in their share prices.

"There is a possibility of a surge in sales and profitability of jewellery companies this festive season. Sales are likely to rise this Christmas season in overseas market. In domestic market too, sales and profit margins may go up with many offers and schemes currently being offered by jewellers," said Alex Mathews, Head Research, Geojit BNP Paribas Financial Services Ltd.

Easing gold supply pressure, the government in November withdrew 80:20 scheme under which a fifth of imported gold was made mandatory to supply to jewellery exporters.

Also, jewellers are getting positive indications from global markets. The world's largest rough diamond miner Russia's Alrosa recently signed pact with Indian diamond processors for direct sale of rough to the tune of $700 million annually for three years beginning 2015, import of raw material is likely to become cheaper.

"Indian importers will save between 5-7% of transport cost in rough diamond import directly from Alrosa," said Vipul Shah, chairman of Gems and Jewellery Export Promotion Council (GJEPC).

Alrosa supplies around 26% of roughs mined globally. Until now, Indian diamond processors were importing roughs directly from the world's two large miners including De Beers and Rio Tinto through sightholding.

Mehul Choksi, managing director of Gitanjali Gems estimates rough diamond price to decline by 1-2% through direct import from Russia.

GJEPC projected India's rough diamond import at $16.72 billion in 2013-14, a rise from $14.93 billion in the previous year.