Amid a sustained pick-up in economic recovery and recent signs of moderation in inflation, the local gems and jewellery demand is seen in a decent shape despite very elevated Gold prices. The spot Gold prices hit record high above Rs 56000 per 10 grams and the sustained drop in the Indian Rupee is last few months has kept the overall outlook bullish in local prices. Global Gold prices also edged up impressively at the start of the year, breaking above $1900 per ounce and hitting a multi month high. According to a latest update from the World Gold Council (WGC), India, the world's second-largest consumer of gold jewellery, has experienced rapid change over the last few years due to evolving demographics. Weddings and festivals remain the most important drivers of Indian gold jewellery demand: bridal jewellery alone accounts for at least half of the market share. Over the long term, gold jewellery demand in India will be driven by developments in economic growth, income growth and wealth distribution, as well as the rate of urbanisation. India's gold jewellery exports have grown over the years, rising from US$7.6bn in 2015 to US$12.4bn in 2019, before the pandemic impacted the trade in 2020. Looking ahead, there is a greater need for Indian gold jewellery exporters to develop new markets; currently, nearly 90% of exports go to just five countries. But a boost could come in the form of further proposals that will allow advance payments to overseas precious metal suppliers, as well as the formation of the mega-CFCs (Common Facility Centres) in the Santacruz Electronics Export Processing Zone (SEEPZ) of Mumbai and Surat.
Budget Expectations:
The Commerce Ministry has sought a reduction in the import duty on gold in the forthcoming Budget with a view to push exports and manufacturing of the gems and jewellery sector, according to media reports. In July this year, the Centre raised gold import duty to 15% from 10.75% to check the current account deficit (CAD) and rising import of the yellow metal. The basic customs duty on gold is 12.5%. Along with the agriculture infrastructure development cess (AIDC) of 2.5%, the effective gold customs duty will be 15%.

Stocks in focus:

Titan, Kalyan Jewellers, Senco Gold, Thangamayil, Goldiam.

Outlook:

A sharp surge in spot Gold prices is already having a very high impact on local Gold demand. India's Gold imports stood at Rs 9732 crore in December 2022, down 72.70% compared to December 2021 and falling around 20% in first nine months of FY23. Silver imports stood at Rs 1384 crore in December 2022, down 30.60% compared to December 2021 and recording a surge of 168% in first nine months of FY23. The Gold import duty cut will be keenly eyed by the market participants in this scenario while the overall spending boost in the form of tax rebates and broad growth agenda will also be in focus.