Beleaguered jewellery traders revived by Dhanteras gold rush

A last-minute rush for Diwali gold purchases has added some sparkle to bullion and jewellery markets across the country.

Faced with sluggish demand for the past couple of months, gold traders had feared lacklustre festival sales this year. However, an uptick in demand for light-weight jewellery and coins has brought the confidence back.

“In the past couple of days, we are seeing revived interest in gold purchases. A few factors have helped lift demand, such as the easing of the Prevention of Money Laundering Act (PMLA) regulations, the upcoming marriage season and comfortable rates,” said Nitin Khandelwal, Chairman, All India Gems & Jewellery Trade Federation. “We expect to close the season at the same level as last year, if not higher.”

While most jewellery retailers have seen an increase in credit/debit card, RTGS and bank cheque transactions post demonetisation, cash continues to dominate sales.

In its India gold demand trends report, the World Gold Council (WGC) had noted demand for 2016 at 4,308.7 tonnes, up 2 per cent from 2015. However, in the first six months of 2017, demand slowed to 2,003.8 tonnes, down 14 per cent year-on-year, the WGC report noted.

“We may not see a significant growth over last year’s gold consumption for several reasons,” said Rajesh Mehta, Chairman, Rajesh Exports Ltd.

“But the buying trend has started coming back to normal. There will be demand for light-weight jewellery and coins. People are still not making big purchases.

“Diwali festivities are crucial for gold sales and that is taking off well now. Dhanteras sales will be better than expected.”

“We are expecting a 20-25 per cent increase in sales this Dhanteras, thanks to the revoking of the PMLA Act, which required KYC documents from customers,” said Ishu Datwani, founder of ANMOL, a 30-year-old brand located in Bandra, Mumbai, frequented by celebrities and Bollywood stars. “A large number of our customers are housewives who save ₹7-10 lakh from their household allowances and are very uncomfortable about sharing their PAN and other details.”

Vaibhav Saraf, Director of Aisshpra Gems & Jewels, with six stores in Uttar Pradesh, expects a 15-20 per cent increase in sales this Diwali.

“Post demonetisation, the market sentiment was pretty dull. However, sales have been good since the onset of Dussehra. Additionally, we opened a 12,000-sq-ft store in Gorakhpur earlier this month, which is the largest store in UP and attracts locals as well as customers from Bihar and Nepal,” said Saraf.

Online jewellery brand BlueStone said it expects to register a nearly three-fold growth this season over last year, largely due to pent-up customer demand and its brand-building campaign that went live in August/September with Bollywood actor Alia Bhatt as brand ambassador.

“We have launched eight new designer collections for the season and our overall growth in FY18 will stand at 120 per cent,” said Gaurav Singh Kushwaha, founder and CEO.

Ahmedabad-based Haresh Acharya of Parkar Bullions, however, maintained that bullion demand has taken a beating.

“Our sales during these festival days have declined 25 per cent. This is mainly because jewellers have been unable to sell. They are therefore taking time to make fresh purchases of bullion. Farmers’ buying has also taken a beating due to lower commodity prices and reduced farm income.”

“The cash liquidity issue still affects the trade. Also, GST has impacted sentiment,” said Acharya, who is also Secretary of the Bullion Federation of India.

Several jewellers, however, maintained that GST had zero impact on consumer buying patterns, largely because taxes before GST were was 2.1 per cent (excise + VAT), which has increased to 3 per cent with GST, a negligible increase.

Traders and bullion experts estimate about sales of about 182 tonnes of gold during the festival season, almost on par with last year. Last year, according to trade sources, right before the November 8 demonetisation announcement, gold sales were robust owing to lower prices.

Prices hovered at around ₹29,656 for 10 g around this time last year. However, today, prices were at around ₹29,868 for 10 g in Ahmedabad.

“There is a risk of price rise, which will affect sales,” said Suresh Hundia of Hundia Exports in Mumbai.

“Already, prices have gained in the past week and there is a risk of a further rise. This may again dent the buying.”

A 2-3 per cent drop in prices, GST and liberalised norms for gold purchase have all pushed up sales in Kerala this season.

“We had been witnessing sluggish sales after Onam, following restrictions imposed by the government coupled with GST issues,” remarked TS Kalyanaraman, President, Kerala Jewellers Federation. “However, the festival season, especially Dhanteras, has boosted demand as is evident from our advance bookings.”

Besides gold jewellery, there has been good demand for diamond, uncut diamond and precious stones.

Kalyanaraman, CMD of Kalyan Jewellers, observed that earlier, gold purchase for Dhanteras was confined to North Indian markets, but now this is a nationwide phenomenon.

( Inputs from Rutam Vora in Ahmedabad, Sangeetha Chengappa in Bengaluru, Meenakshi Verma Ambwani in New Delhi and V Sajeev Kumar in Kochi)