Gold jewellery demand likely to rise 10% in 2015: ICRA

Says the demand will rise on the back of improved consumer sentiments

Jewellery demand in the domestic market is expected to rise by 10% to $32 billion in 2015 on the back of improving consumer sentiments, says a report by ICRA.

"We expect domestic demand for gold jewellery to rise 10% in calender year 2015 to $32 billion on the back of subdued pick up during 2014," the rating agency said in 'Indian Gold Jewellery Retail Industry' survey.

The demand has been stable since Q4 of CY13 and lower prices, easing regulations and improving consumer sentiment are likely to provide impetus in the coming months, it said.

The last quarter of CY2014 is likely to make up for the initial demand slump and the aggregate demand for the year is estimated at $29 billion, the report added.

Indian domestic gold jewellery in the retail segment had seen the demand at $31 billion in CY2013.

India, amongst the two largest consumers globally along with China, would witness sustained growth owing to cultural affinity, demographic diversity, rising disposable and preferred investment vehicle that are seen as the main growth drivers for the retail jewellery industry, it added.

"It is interesting to note the rising share of organised players in the retail jewellery segment to 20% from 11%," the report said.

However, sustained pressure on prices that resulted into postponement of purchases is one major concern of jewellers, as some also believe that any re-introduction of restrictive policies and plateauing of demand sentiment are other possible concerns over the near term.

The industry expects to record robust volume growth driven by improving industry sentiments amid easing regulatory norms and envisaged expansion plans by jewellers during the next 12 months, the ICRA report said.

Volatility in the gold prices and prudent management of financial profile given incremental expansion plans are also seen as the immediate challenges for the industry.

Further, it said, the import volume is expected to remain firm, with 20:80 scheme being withdrawn, and help meet bulk of the requirements by substituting a portion of illegal imports and recycled volumes.

Gradual easing of restrictions aided by RBI's notification in May 2014 allowing premier or star trading houses to import bullion under the 20:80 rule has helped imports a stage smart recovery, it pointed out.

ICRA said the Industry expects gold prices to remain largely range bound around current levels, owing to a strong US dollar, weak crude prices and related low inflation expectations limiting price increases.

However, the expected improvement in physical demand from China and India may pull the domestic prices higher, reflecting their expectations of the domestic currency.