Jewellery stocks plunge 20% on falling gold prices, RBI policy

Shares of jewellery makers slump on the back of recent government measures to curb gold sales and falls in global prices of gold.

Led by Gitanjali Gems, shares of most of the gems and jewellery firms plunged 20 per cent in the afternoon trade on Monday on the back of falling gold prices and the Reserve Bank of India's measures to curb gold sales.

At 12.20 pm, Gitanjali Gems LtdBSE -19.99 %fell by its daily limit of 20 per cent and was locked in lower circuit at Rs 400.90. Other jewellery stocks such as PC Jeweller Ltd was down 10.36 per cent, Tribhovandas Bhimji Zaveri Ltd fell 12.85 per cent and Shree Ganesh JewelleryBSE -9.28 % was down 9.1 per cent at Rs 74.30.

"Falling gold prices, RBI policy and impositions of high taxes are primary reasons of fall in gems and jewellery stocks," said AK Prabhakar, Senior Vice President Equity Research, Anand Rathi Financial Services.

Prabhakar is of the view that the demand for gold will slump further if investors have to show their PAN card. It will curtail big buying and listed companies will get hit the most by a sharp drop in sales.

The government has raised import duties for gold twice since Jan. 1, doubling it to 8 per cent, but the central bank moves to tackle supply, such as making jewellers pay for gold up front, have had more impact.

"Imports could fall sharply in June and July, industry players say, because of these upfront payments, making it hard for the millions of small family shops who account for most of India's jewellery business to buy," Reuters said in a report.

In the last 25 year gold prices have been rising in India due to weakness in rupee which was around 10 in 1982 and today it is around 60 compared to the US dollar. Going forward, gold as an asset class could give negative returns, added Prabhakar.


Here is a list of ten gems and jewellery stocks which are under pressure:

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