gold prices: Gold moving out of duty cloud brings shine to jeweller stocks

Analysts said the move aimed at curbing illegal imports of gold would benefit domestic jewellers, especially the large organised ones.

Shares of Kalyan Jewellers were the top gainer at 6.2%. PC Jeweller, RBZ Jeweller and Vaibhav Global rose between 1.7% and 5%. Titan inched 0.1% higher. TBZ fell 1.8% and Senco Gold fell 1.7%.

“The input cost for jewellery companies has gone down after the import duty was cut which has given a major push to these gold jewellery companies,” said Apurva Sheth, head of research at Samco Securities.

The government reduced the import duty to 6% from 15% earlier, which would lower gold prices in the country.”The listed companies had been facing intense competitive pressure from local players who were offering lower prices and discounts,” said Heman Jani, director at Finazenn, an investment advisory. “The competitive intensity is now expected to come down which is why stocks are going up. If gold prices come off after this move, we may see a revival in its demand, which will be advantageous for the listed gold companies.”Gold had shot up almost 17% in 2024 to as much as ₹76,200 for 10 grams until last week. On Wednesday, prices cooled down to ₹71,065 for 10 grams after the budget announcement. “Duty cut-led moderation should also catalyse consumers, who have been on the fence in the wake of the recent spike in gold price,” said Emkay Global in a client note. “We believe the move (reduced arbitrage) is aimed at curbing the illegal import of gold which should bring in gold price discipline in the market and significantly benefit organised jewellers.”

However, Jani added that this will lead to a one-time inventory loss for the companies. “The loss may be the highest in Titan at around ₹500 crore, and lesser in other smaller companies like Kalyan Jewellers, Senco Gold and TBZ,” said Jani.

Sheth said that extra cash with people could be diverted to gold now with falling prices, especially with the upcoming festive season.

“Government’s populist measures will lead to more cash in the public’s hands, which would flow into these consumer-facing companies,” said Sheth. “We remain bullish on Titan as it has been giving good results consistently, and gold may see more buying going ahead.”

Jani is also optimistic about Titan with a price target of ₹3,650 (5% upside) as it has underperformed the market recently and said that this move will help it regain its market share.