Gems and Jewelery Sector

magnet

Active member
#1
Well all of a sudden the sector have made a u-turn.

The blue eyed boy (Gitanjali Gems) of this sector showed it today by going at 20% lower circuit that good old days have ended for the sector.

Also until the current account deficit of the country settles this sector will bleed further.

Today's reason for downturn was that less than half of estimated gold will be imported in June to September quarter.

And further fuel to fire was put by the news that gold coin sale by jewelers too will be banned soon.
Also gold price crash and further downgrade in gold price by Goldman Sachs further eroded the mood.

Share your views regarding the sector here.

Note::I have holdings in TITAN (20 shares),TBZ (3 shares) and Shree Ganesh Jewellery (22 shares).
 

Alchemist

Administrator
Staff member
#2
And further fuel to fire was put by the news that gold coin sale by jewelers too will be banned soon.
Jewelers have voluntarily decided that they will not sell gold coins, biscuits and bars. There is no ban as such. If a jeweler wants to sell gold coins, he can do it.

The motive behind this decision is a selfish one.

In the absence of capital flows, the rupee will continue to fall unless something is seriously done about the trade account deficit.

Oil imports cannot be lowered, at least not in the short term and medium term.

After crude oil, India's next biggest import is gold.

If the rupee continues to fall, there is a possibility that gold imports will be totally banned or a heavy import duty (20%+) will be levied in future. Such a move would badly hurt the jewellery business in India.

Jewelers have much larger operating margins in jewellery than in coins, biscuits and bars. Sometimes the operating margins are as high as 30% in jewelry.

If they stop selling pure gold, they don't have much to lose. The losses that they will have to face if gold imports are restricted will be much larger.

Jewelers have decided to stop their low margin business to protect their high margin business. They want customers to buy gold only in a form which makes them (jewelers) more money. There is nothing patriotic about this decision.

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There seems to be a company-specific problem with Gitanjali Gems. I am not sure what the problem is.
 
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