Prime Minister Narendra Modi's recent appeal asking Indians to avoid buying gold for one year and reduce fuel consumption has started affecting the gold and jewellery market across the country. During his address, Modi urged citizens to delay unnecessary foreign travel, cut fuel usage, and support work-from-home practices similar to the Covid era wherever possible. According to latest reports, jewellery stocks and gold-related businesses witnessed a decline as investors reacted to the government's economic appeal. Market experts said the announcement created uncertainty among traders and buyers, leading to weaker demand in the gold sector. As per ET Now, Pashupati Advani of Global Foray warned that a slowdown is coming and investors need to pick their spots carefully, noting that Modi's call for austerity was the first such signal from leadership in many years.
The Government of India has increased import duties on gold and silver to 15 per cent from the previous 6 per cent, creating significant pressure on jewellery retail stocks. According to reports from ET Now, the revised duty structure includes a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC). The move is aimed at reducing overseas purchases of precious metals, narrowing the current account deficit, and supporting the rupee as well as foreign exchange reserves. Jewellers and bullion traders reported that many customers are now postponing major gold purchases after the Prime Minister's statement, with experts believing that if people follow the appeal on a large scale, the demand for gold imports may reduce significantly in the coming months.
Foreign institutional investors have been aggressive sellers, dumping roughly ₹20,000 crore worth of Indian equities in the last month alone, creating significant supply-side pressure on the broader market. As per ET Now, this massive outflow has acted as a significant drag on the market, compounding the challenges faced by jewellery retail stocks. The ongoing turbulence has seen Indian markets face four days down, one day up in recent sessions, reflecting the broader market uncertainty driven by both domestic policy changes and foreign investor sentiment.
Global brokerage Citi has raised near-term concerns for the jewellery retail sector following the government's announcement. As reported by ET Now, the brokerage highlighted that the increase in gold import duty to 15 per cent from 6 per cent is negative for the sector in the short term. Citi emphasized that supply-side risks are more significant than demand-side concerns, with higher gold prices potentially weighing on consumption demand in the near term. The brokerage also warned of a potential slowdown in formalisation due to increased illicit gold arbitrage, as higher duties may unintentionally push a part of the market back into the informal economy.
Despite the challenges facing jewellery stocks, market experts suggest selective opportunities remain in certain sectors. According to ET Now, infrastructure plays, quality exporters, and pharma appear to be the anchors in an otherwise uncertain market environment. For retail investors, the message is simple: stick to fundamentals, avoid the noise, and let the government's spending priorities guide your sector bets. The broader market sentiment remains cautious as the government's policy shift creates new dynamics in the precious metals trade, with several companies now reviewing work-from-home options again to help lower fuel consumption and transportation costs.
