Jewellers Shine as RBI Eases Gold Curbs

The Economic Times - - Markets & Finance - BISWA­JIT BARUAH

The stocks of jew­ellery mak­ers ral­lied up to 20% on Thurs­day af­ter the Re­serve Bank of In­dia eased gold im­port norms. PC Jew­eller surged 19.59% to close at Rs 123.90 on the Bom­bay Stock Ex­change. The stock hit its 52-week high of Rs 124.30 ear­lier in the day. Thanga­mayil Jew­ellery gained 19.97% to close at Rs 154.40, Trib­ho­van­das Bhimji Zaveri ral­lied 19.96% to Rs 191.75, Gi­tan­jali Gems was up 11.93% at Rs 102.30, Ra­jesh Ex­ports gained 11.10% to close at Rs 142.10 and Ti­tan Com­pany climbed 6.55% to close at Rs 330.45. The rally fol­lowed RBI’s an­nounce­ment that se­lect trad­ing houses will now be al­lowed to pro­cure gold in ad­di­tion to per­mit­ted banks. The cen­tral bank also eased some fi­nanc­ing rules, al­low­ing banks to give gold loans to jewellers. An­a­lysts said the move will in­crease gold sup­ply, im­prove con­sumer senti- ment and brighten the earn­ings out­look for jew­ellery mak­ers “We ex­pect jew­ellery stocks to wit­ness con­sis­tent re-rat­ing in the com­ing quar­ters. We have up­graded Ti­tan and Trib­ho­van­das Bhimji Zaveri to ‘ buy’,” said Ab­hi­jeet Kundu, an­a­lyst at An­tique Stock Broking. An­a­lysts said lift­ing the ban on gold loans will be a big pos­i­tive for the sec­tor as it will lead to a sig­nif­i­cant re­duc­tion in in­ter­est costs on sourc­ing of gold.

Un­der the gold-on-lease ar­range­ment, com­pa­nies can take gold on lease for up to 180 days in­stead of buy­ing it with up­front cash at much lower in­ter­est rates. “The in­dus­try used the gold-on-lease model be­fore the ban, and RBI’s re­cent re­lax­ation will help play­ers sharply re­duce debt, thereby boost­ing re­turn of

The move is ex­pected to lead to a sig­nif­i­cant re­duc­tion in in­ter­est costs on sourc­ing of gold

cap­i­tal em­ployed and work­ing cap­i­tal cy­cle,” said Ab­neesh Roy, an­a­lyst at Edel­weiss Se­cu­ri­ties.

The new stip­u­la­tions will im­prove gold sup­ply in In­dia, the world’s sec­ond-big­gest con­sumer of the metal, to 55 tonnes per month from the cur­rent 25-30 tonnes. They will also re­duce pre­mi­ums to $20 per ounce from a peak of $160 per ounce, an­a­lysts said. “We ex­pect other re­stric­tions on gold like the 80:20 rule and high im­port du­ties to be also taken off grad­u­ally, as the cur­rency has re­turned to com­fort lev­els and the il­le­gal im­port of gold has be­come a con­cern for the au­thor­i­ties,” Arnab Mi­tra, re­search an­a­lyst at Credit Suisse, said in a note to its clients.

Last year, RBI had im­posed se­vere re­stric­tions on gold im­ports to check the bur­geon­ing cur­rent ac­count deficit and slid­ing ru­pee. The bank had tied im­ports with ex­ports and pre­scribed an 80:20 for­mula, which re­quired nom­i­nated agencies im­port­ing gold to ex­port 20% of the im­ported gold.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.