Shares of gold financiers Manappuram Finance, Muthoot Finance, and IIFL Finance rallied sharply on Wednesday after the government raised import duty on gold to 15%. According to reports from The Economic Times, IIFL Finance shares rallied nearly 11% to trade at ₹493.20 apiece, reaching the highest level since the end of February. Muthoot Finance shares jumped over 4% while Manappuram Finance shares surged around 3% on Wednesday. The rally was triggered by the government's decision to increase customs duty from 6% to 15% to curb imports and stabilize the rupee. As per The Economic Times, the broader smallcap market outperformed with the Nifty Smallcap 100 index gaining 153 points (0.85%) to hover around 18,092, while the benchmark Nifty 50 index gained 115 points (0.5%) to 23,495.
The domestic gold market responded strongly to the policy change, with MCX gold futures for June expiry jumping ₹11,055 or more than 7% to ₹1,64,497 per 10 grams on Wednesday. As reported by The Economic Times, contracts with August and October expiries also surged more than 6% each. The government introduced the import duty hike to stop the rupee's free fall and moderate non-essential imports during a period of heightened global uncertainty linked to the Iran-US conflict, which continues to keep oil prices elevated above the $100 per barrel mark. Gold prices jumped about ₹9,600 while silver soared nearly ₹17,000, marking one of the biggest one-day rallies in recent months amid lingering volatility from Middle East tensions and tariff uncertainty.
India's gold jewellery market is experiencing significant adjustments following the duty hike, with consumers rushing to make purchases before the new rates take effect. According to The Economic Times, consumers are opting for lighter, lower-value jewellery items and advancing purchases planned for later in the year. The buying frenzy is driven by uncertainty and cultural significance of gold, with jewellers reporting a significant increase in sales. However, industry experts predict a drop in sales volumes as consumers adjust to the new reality of higher import duties. Jewellery stocks have plunged up to 20% in three sessions, erasing nearly ₹60,000 crore in investor wealth after Prime Minister Narendra Modi urged households to defer gold purchases. Prime Minister Modi's call to reduce gold buying has sparked widespread online humor, with husbands across India celebrating the appeal, as social media is flooded with memes and jokes portraying this as a long-awaited government endorsement for delaying expensive jewelry purchases.
Revenue intelligence and customs officials are preparing to tighten surveillance across airports, seaports and land borders after India raised import duty on gold and silver to 15%. According to The Economic Times, authorities plan to increase monitoring of smuggling routes, carrier networks and foreign syndicates to prevent a revival in illegal gold trade following the sharp tariff hike. The move aims to reduce India's trade deficit and support the rupee by curbing illegal imports and ensuring proper duty collection.
The move came after Prime Minister Narendra Modi on Sunday urged citizens to reduce purchases of non-essential gold over the next one year. According to The Economic Times, Modi said the move could help reduce pressure on foreign exchange reserves and imports. Sumit Singhania, Research Head at Bajaj Broking, noted that India continues to remain the world's second-largest consumer of gold after China, with demand primarily driven by the jewellery industry. Higher duties are expected to reduce precious metal imports, support the rupee, and help narrow the trade deficit. However, experts warn that the India-UAE trade pact now offers a significant arbitrage opportunity, with gold entering at 14% compared to the new general rate, potentially leading to increased gold imports via Dubai. Despite the current market volatility, analysts see no structural threat to India's long-term gold demand.
The Gem and Jewellery Export Promotion Council has urged the government to discuss ways to control gold imports, stating that increasing import duties only raises prices and does not reduce imports. Higher duties also encourage smuggling and increase export costs. The council suggests promoting lower-carat gold jewellery and reviving the Gold Monetisation Scheme to address these issues. Experts advise existing investors to hold, suggesting digital gold for new buyers, and propose solutions like domestic gold recycling and tax law amendments to address import concerns. While the intention is welcomed, the industry fears business and job impacts, with experts warning that the move may simply push more demand into the grey market, with limited impact on India's structural gold appetite.
