Jewellery stocks have extended their decline for the second consecutive day on Tuesday, with Thangamayil Jewellery tumbling over 8% following Prime Minister Narendra Modi's call for postponing gold purchases for a year. According to latest reports, the free fall has affected other major players including Titan Company (down nearly 1.5% after falling more than 10% in previous two sessions), Kalyan Jewellers India (dropping 5.9%), Senco Gold (down 14%), and Sky Gold (declining around 18% each). The combined selloff has erased close to ₹60,000 crore in investor wealth across the sector in just three trading sessions.
The sharp decline follows what analysts describe as a double blow from the government: Prime Minister Narendra Modi's appeal to defer gold purchases for a year and a steep hike in gold import duties aimed at stabilising the rapidly weakening Indian rupee. As reported by The Economic Times, the government has raised the effective import duty on gold and silver to 15%, just a day after Modi's comments. Modi's latest call comes amid the West Asia crisis, with the government seeking to save foreign exchange through the postponement of gold purchases. The import duty hike, which includes 10% basic customs duty and 5% Agriculture Infrastructure and Development Cess (AIDC), will make gold costlier by around ₹27,000 per 10 grams from the earlier ₹13,500/10 gm. Higher duties could weigh on demand in the world's second-largest consumer of precious metals, although they may simultaneously help narrow India's trade deficit and provide support to the rupee.
According to Sameer Dalal of Natverlal & Sons Stockbrokers reported by The Economic Times, he does not expect Modi's appeal to meaningfully change consumer behavior in a country where gold purchases remain closely tied to weddings, traditions and family occasions. The government's decision to raise import duties has intensified concerns around the sector, as higher duties raise domestic gold prices and potentially make jewellery purchases more expensive, prompting consumers, particularly in price-sensitive segments, to postpone discretionary buying. The latest decline on Tuesday demonstrates continued investor uncertainty following Modi's latest policy announcements. Industry experts predict that while sales volumes might shrink by 10-15%, the actual 'value' of sales will stay high because the gold itself is so expensive, with consumers likely to buy lighter weight jewellery. However, industry experts have warned that the sharp hike could revive gold smuggling in the country, as smugglers may become more active due to the increased cost differential.
Despite near-term challenges, industry leaders are adapting to the new reality. According to IBJA's Mehta, the jewellery business is bracing for a 5-7% dip in overall business for retailers, with this slump likely to stay. Senco Gold and Diamonds MD Suvankar Sen warns that the higher duty structure will probably remain entrenched for at least a year or until the Middle East crisis cools. From an industry perspective, there may be near-term moderation in discretionary purchases or a shift towards lighter, more exchange-driven purchases. However, the long-term outlook for the jewellery sector remains positive, supported by India's strong cultural demand, rising incomes, and continued trust in gold as an important store of value. As per M.P. Ahammad of Malabar Group, there may be near-term moderation but the durability of these measures will ultimately depend on global oil trends, capital flows and how long external pressures on the currency persist.
