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Festive fervor grips gems and jewellery industry

Buoyant sentiment, attractive prices leads to surge in jewellery buying during Dhanteras and Diwali. Jewellery shops across the nation got good footfalls during the festive season, with a 15-20 per cent increase in purchase compared to last year.

Dhanteras, associated with Lakshmi – the goddess of wealth, and Diwali, the festival of lights, are both considered auspicious to buy gold jewellery. Hence, the gold sales in India during the festival by about a fifth, a senior official at the country’s biggest old trade group said as per the reports. According to rough estimates, the gold purchases climbed higher by at least 15 per cent to 20 per cent when compared to last year. The retail jewellery outlets in the country recorded higher foot falls this year.

Gold sales jump by 20 per cent during Diwali

Deepak Tulsiani, Co-director of Dwarkadas Chadumal Jewellers, renowned jeweller from Zaveri Bazar witnessed good footfalls at their store. He said, “Dhanteras and Diwali are considered to be a very auspicious days to buy gold in our country. We have seen a huge response and our stores were fully packed during this festive season.” In a contradicting view, Tulsiani feels the response last year was better. He explains, “Although the sale of gold jewellery was higher by 20% compared to last year because the gold rate was less by 15% compared to last year plus the wedding season is also coming up so it gives a great boost to the sales.”

According to Haresh Soni, Chairman of the All India Gem & Jewellery Trade Federation (GJF), the demand for jewellery is up by 15-20 per cent this year. However, the demand for gold as an investment is less, with only small denomination of gold coins below 10 gm attracting buyers, he said. Roots by Ramniklal & Sons also witnessed excellent response of consumers. Vishal Dhanak, Director of Roots says, “Dhanteras is considered as good occasion for purchasing gold. Certainly, the sales have gone up, it has been quite brisk and footfall has been significantly higher than a normal day.”

In a report, Saurabh Gadgil, MD of Pune-based PN Gadgil & Sons was quoted, “there had been good buying since morning. A section of our consumers are buying heavy jewellery like necklaces and bangles. Bridal jewellery is also in demand. Coins of small denominations are also being sold, but not in huge quantities.” Kerala-based Kalyan Jewellers has also seen good demand for jewellery at its outlets in Mumbai, Delhi, Punjab and Gujarat. Shailesh Daga, Director of Palak Jewellers, renowned manufacturer from Zaveri Bazar said, “This year, the supply side is much better and prices are less which was reflected in the demand.”

Branded jewellery stores like Tanishq and Senco witnessed only a marginal increase in volume. Suvankar Sen, Executive Director of Kolkata-based Senco Gold told that demand at his stores picked up by 5-10 per cent by grammage. “We are marginally better by volumes in terms of Dhanteras 2013, but let’s not forget that last year’s occasion was relatively tepid than the preceding one,” he told Economic Times. Pradeep Jethani, Founder and ace designer of Jet Gems from Mumbai said, “There has been a marginal increase in sales this diwali compared to previous year.”

New Government, Policies, declining gold prices and wedding season responsible for increasing demand

A stable government at the centre and easing of inflationary pressure were accounted for good sales this year, some jewellers notified. The outlook continues to be positive as they predict the market to improve. “Petrol and diesel prices have come down and headline inflation declined to a five-year low of 2.38 per cent in September. This lifted the mood among consumers. We are also seeing a lot of rural demand,” said Haresh Soni, chairman of the All India Gem & Jewellery Trade Federation (GJF). “The demand for jewellery is up 15-20 per cent this year as the wedding season is set to begin from first week of November,” he said “It is good for the trade which engages 10 million people.” But demand for gold as an investment is less, with only small denomination of gold coins below 10 gm attracting buyers, he said.

Tulsiani notifies that with the new government and new policies in place, customers had expected a fall in gold prices. However, there hasn’t been much difference in the rates and hence the sales carry on as usual. Last year, Dhanteras sales had been weak as severe import curbs affected gold supply and pushed up prices to Rs 31,000 per 10 gm. Inflationary pressure and economic uncertainty ahead of general elections had left their impact on Diwali gold sales. On Tuesday, prices of 24-carat gold with 1 per cent VAT were around Rs 28,300/10 gm in Maharashtra. Gold for jewellery (22 carat) was Rs 27,700/10 gm. “I have been able to buy more gold this year as prices are less compared to last year,” said Arunika Sharma, a Mumbai-based research analyst.

Last year, the gold supply was squeezed following strict restrictions on gold imports. This had resulted in higher gold prices. Gold is cheaper by nearly 11% when compared to last year. The cheaper gold prices have contributed to driving the gold demand further during the festive season. The supply side too remained better in comparison with the previous year. Jethani said, “Depreciation of gold prices is one of the key factors for increasing gold demand this Diwali. In fact, it was noted that there was a lot of buying before Diwali & Dhanteras as the gold prices were low. Due to awareness and competition the consumer tendency towards buying jewellery is changing and hence, they no longer wait for festival to come for shopping jewellery.”

Dhanak adds, “Compared to last year, the prices of gold have been low which makes this a good year in terms of investment. With gold prices being low and stable, we see a robust growth and volumes have grown higher. Also, since Roots provide extremely modern graceful jewellery, the demand for our designs has been higher irrespective of the gold prices.” Besides price of gold, forthcoming wedding season has also contributed to the sales of jewellery during the festival. Tulsiani shares, “Though the sales have not met up to the expectations as compared to last year. We are also seeing a lot of pull due to the wedding season coming up.” The wedding season is giving boost to the sales.

Jethani shares, “People are smart buyer, so they strategically keep the wedding in and around festivals. Also, as there are multiple offers during this time of the year, many consumers take this opportunity to buy heavy jewellery at discounted rates.” High demand for gold will likely continue to be strong in India after the festival as the wedding season runs through February.

Demand for gold and silver likely to pick up in rural areas

Demand for gold and silver picked up in rural areas, as prices of the two precious metals are on a downward slide at a time when harvesting of kharif crops has begun in parts of the country and arrivals have started at mandis, generating cash flow for the farming community. Gold prices have dropped to about Rs 26,560 per ten gram while silver has hit a low of Rs 32,200 per kg. The precious metals continue to be the two major asset classes in rural India, unlike in urban parts of the country.

Rural India accounts for about 60 per cent of India’s annual consumption of 950 to 975 tonnes of gold. According to the section of jewellers, silver is likely to see more demand this year than gold. The rich farmer go for gold while the smaller and marginal farmer that constitute the majority of farming community opt for silver, said Rajendra Kumar Bader, VP, Delhi Jewellers Association. He further added that silver is the most common asset class in rural India.

Gold, Silver charts top, followed by diamonds this Diwali

Yellow gold is the most popularly purchased by masses as it speaks of traditional jewellery. According to shop owners, sale of heavy jewellery too remained robust. There was unprecedented rise in demand for gold and silver coins, as most of the shops went out of stock by afternoon. The footfalls surged as people flocked the shops to buy gold on general assumption that gold prices are unlikely to fall further.

GJF noted that gold and silver sales during Dhanteras & Diwali remained extremely upbeat this year. With the advent of wedding season in the country, gold demand is expected to stay robust during the entire last quarter of 2014. However, Dhanak notifies, “There are groups of people who have now developed a taste for diamonds with white gold or platinum giving it an universal edge and can be adorned in both Indian and international couture. Having said that, the demand for yellow gold was more in the market because it is the masses’ preference.”

Jethani also feels that consumer preference is shifting from gold to diamonds, precious and semi-precious stones. However, the first choice continues to be gold. Tulsiani affirms, “Gold jewellery fared better since Gold is bought by people across communities on the festive days. People prefer buying gold jewellery over diamonds and platinum during this season.”

– Rika Aash Pathak