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This appetite did not reduce after the higher tax on gold imports this year too, say industry experts.
Says Balram Garg, MD of PC Jewellers, “The import duty hike has been passed on to the customers.”
Retail consumer demand comprises of around 75% of India’s gold demand. And this unabated appetite of Indian consumers for the precious metal is what jewellers are betting on. PC Jewellers, which got listed on the stock market recently, saw a growth of 30-35 per cent in new customer base the October – December quarter of 2012, largely driven by their gold saving scheme. Most jewellers offer this scheme including Tata group promoted Tanishq and PN Gadgil Jewellers.
These schemes are similar to recurring deposit schemes offered by banks and the India Post — that allow you to save small amounts for different tenures. At the end of the term, you can buy gold jewellery of your choice (gold or silver) worth the accumulated amount.
Most schemes allow a minimum investment of Rs 500 a month and in multiples of it. While Tanishq offers 12-month and 18-month tenures, PN Gadgil runs three schemes for one-, two- and three-year terms and PC Jewellers' customers need to pay 12 installments and the company adds 2 at the end.
You can only buy jewellery not coins or bars. And neither is cash refund allowed. “There is very less margin on coins/bars so this scheme is only for buying jewellery and in future also the scheme of things will remain so,” says Garg. Hence, these scheme cannot form a part of your investment portfolio. These can only help you save a little extra along with diversification. If you have a wedding coming up in the family in a year, these gold accumulation schemes are an easy way to save for it.
Agreed the rate of return is decent at 8-9 per cent. But, today even banks recurring deposit are offering that much and are a safer bet. Banks also offer 6-month deposits, in case of an emergency you can withdraw cash.
D Sundarajan of Trendy Investments had earlier told Business Standard that such schemes are risky for individuals as jewellery business is not regulated and so there is no safety of the money. There is also the risk of default.
Importantly, you may not know the gold price movement on maturity of the scheme. You'll be lucky if the prices fall but what if it rises. You will have to be satisfied with a small buy, you won't be allowed to take cash back either. This option is illiquid.
If you are looking for investment opt for gold exchange traded funds or gold fund of funds, the latter does not need a demat account also. The mirror the international gold price and hence will help you save enough for future requirements.
