What’s Driving the Jewellery Stock Rally?

Jewellery stocks have been shining brightly on Dalal Street, adding a touch of brilliance to investors’ portfolios. A surge in demand and positive market sentiment has led these stocks to exceed expectations and significantly boost investors’ wealth.

Top companies in the sector have enjoyed substantial gains, driven by rising gold prices and increased festive season demand. 

The recent reduction in customs duties on gold and silver, announced in the latest Union Budget, has also boosted gold stocks. As a result, jewellery stocks have experienced a sharp rise, continuing to gain momentum in September.

What’s Powering the Surge in Jewellery Stocks and Gold Imports?

Rapid expansion plans

Jewellery companies are quickly expanding to keep up with growing demand. As of June 30, 2024, Kalyan Jewellers had 89 FOCO showrooms across India and plans to open 80 more in FY25, with Letters of Intent (LOIs) already signed for all the new locations. Senco Gold has also grown its network to 165 showrooms, adding 6 new ones in the June quarter. The company is gearing up to open a solid lineup of new showrooms under both the COCO and FOFO models later this year, in line with its growth strategy.

Gold Imports Surge Amid Festive Demand

India’s gold imports more than doubled in August, reaching a record USD 10.06 billion. This sharp increase was driven by a steep customs duty cut and a rise in festive buying, along with ongoing gold purchases by the central bank.

As the second-largest gold consumer after China, India relies heavily on imports to meet its jewellery industry needs. While gold demand dropped by 9% in the first quarter of this financial year, the July-August 2024 period showed signs of recovery, with further growth expected as the peak wedding season approaches.

Gold Shines as Top-Performing Asset in 2024

Gold has been on a strong run in 2024, outperforming all other asset classes and delivering impressive returns. Starting the year at $2,062 per ounce, spot gold has climbed 24.5% to $2,567 per ounce. In comparison, the Nifty 50 has risen by 16% during the same period.

The continued rise in gold prices this year is due to several factors, including geopolitical tensions, worries about inflation, central bank gold purchases, and economic uncertainties, all of which have kept demand high.

Top Performers in the Jewellery Market

In particular, Tribhovandas Bhimji Zaveri (TBZ) shares have surged almost 60% this month. Meanwhile, shares of Motisons Jewellers, PC Jeweller, Senco Gold, Kalyan Jewellers, and Thangamayil Jewellery have climbed 52%, 52%, 13%, 22%, and 22%, respectively, during the same period.

Rising Demand for Jewellery

The surge in jewellery demand in India is fueled by rising disposable incomes and a growing trend toward wearing jewellery regularly, beyond just weddings and investments. New designs, diamonds, hallmarking for trust, and better shopping experiences at organised retail stores are also key factors.

Despite the rise in gold prices, domestic demand for jewellery continues to grow. Companies benefit from inventory gains when prices go up, especially regional jewellers who keep more of their gold unhedged and profit directly from price increases.

On the other hand, bigger companies like Titan and Kalyan Jewellers hedge 70–90% of their gold but still gain from the unhedged portion as gold prices rise.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.