Jewellery shares shed sheen after Exim sop

Gems and jewellery stocks have failed to react positively to the Exim Policy announcement of free import of gold.

Jewellery exporters and domestic bullion dealers got a shot in the arm when the Centre on Wednesday allowed them to buy gold and silver directly from abroad without going through nominated agencies.

The stock price of SB&T International declined to Rs 56.35 from Wednesday's Rs 57.55 on the Bombay Stock Exchange (BSE), while. Suashish Diamonds dipped from Rs 47.50 to Rs 47 and Sunraj Diamonds slipped from Rs 6.75 to Rs 6.50.

The Classic Diamonds share marginally increased from Rs 96.30 to Rs 99.20, while Shrenuj & Co marginally rose, from Rs 45 to Rs 45.05.

Goldiam International improved from Rs 52.30 to Rs 53.49, Rajesh Exports increased from Rs 121.50 to Rs 123.90, and Vaibhav Gems gained from Rs 54.55 to Rs 57.90.

The domestic bullion market also has failed to react positively to the announcement for permission to directly import gold bypassing intermediaries.

Ideally, gold prices should have declined on expectations of easier, less expensive and timely import of gold in case of direct buying.

However, the gold price in the domestic market has continued to keep pace with the international markets.

In the domestic market, the spot price of standard gold marginally declined to Rs 6,115 and pure gold to Rs 6,155.

The domestic trend mirrored the international markets where gold starting at $409.75/410.50, down slightly from New York's close on Wednesday at $410.20/410.80, with dollar steadier against the euro.

This is against the rise seen on Wednesday immediately after the Exim Policy announcement. Gold had then risen to Rs 6,125 from Tuesday's close of Rs 6,045.

The pure gold price closed up at Rs 6,165 compared with Rs 6,085. Silver ended at Rs 9,895 up by Rs 220 from Tuesday's Rs 9,675.

"The announcement of allowing direct import does not make much of a difference. Even the baggage allowance of NRIs which has been freed from quantitative restriction of 10 kilogram does not make much of material impact," Kunal Shah, analyst, BullionIndia Infoservices and Consultancy said.

Earlier the price of gold in India used to be higher than the international prices. However, now the prices are ruling lower due to slack demand and also due to various sales tax and octroi issues. And recycling of gold has lowered the demand for fresh yellow metal.

"The unofficial havala rates are lower than the rates in India so it does not make much of an attraction for an importer to get it directly," Prithviraj Kothari, director, Bombay Bullion Association explained.

India exported gems and jewellery worth $9.1 billion in 2002/03 (April-March), accounting for nearly one-fifth of the country's total exports.

The country buys rough precious stones, mainly from Belgium and Israel, which it cuts and polishes before exporting.

Nearly 40 percent of its exports go to the United States, which buys half the world's jewellery. Hong Kong and Belgium are other major markets for Indian diamonds and studded ornaments.

India accounts for about 60 percent of the global diamond market and nearly six percent of the jewellery market in value terms. Its precious metals sector employs three million people.

Exporters and gold traders welcomed the ruling because both traders and jewellery exporters would save time and money.