Jewellery company stocks were sparkling all over in BSE on Tuesday with hopes of revival in domestic demand for gold jewellery during this festival season after the sharp fall in gold prices in last two days.

The drop in gold price has come at the appropriate time for a series of festivals that will start with Dusshera on October 6, followed by Dhanteras and Diwali, when demand for the yellow metal goes up.

Gitanjali Gems gained four per cent to Rs 357, Rajesh Exports was up seven per cent at Rs 123, Titan Industries, Su-Raj Diamonds & Jewellery and Goenka Diamond rose three per cent each to Rs 213, Rs 45 and Rs 41.

Hammered

“Some of these stocks were hammered in the last few days even though their prospects were looking better with substantial depreciation in value of rupee against dollar,” said an analyst.

Jewellery companies generally have huge export revenue and weak rupee works out in their favour. However, the global economic slowdown has hit the jewellery exports to US and Europe, which are considered the largest market for Indian exports. While the US accounts for about 25 per cent of the country's total gems and jewellery exports, Europe contributes 20 per cent.

Gems and jewellery exports grew at a slower pace of six per cent to $3.3 billion in July against $3.1 billion recorded in the same period last year, according to the Gems and Jewellery Export Promotion Council's data. Exports between April-August of this fiscal grew 16 per cent to $18.12 billion compared to same period last year.

BUY AT DIPS

After the sharp fall, gold prices on Tuesday gained with demand reviving from bargain hunters and jewellers. However, the plunge in gold prices may not prolong.

Mr Anand James, Chief Analyst, Geojit Comtrade, said, “We have advised investors to buy at dips as the demand for physical gold during the festival season and the international factors such as the trouble in Euro zone and uncertainty in US is expected to keep prices firm.”

Standard gold gained Rs 450/ 10 grams to Rs 26,675 on Tuesday while pure gold was up by Rs 445/ 10 grams at Rs 26,800. Gold had hit an all-time high of Rs 28,300/ 10 grams on September 6.

The prospects of jewellery company stocks will be in line with the gold price movement, but their earnings are expected to be much higher with significant improvement in margins, said an analyst.

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