Union Budget 2024: Jewellery shares rally as govt cuts custom duty on gold

India Budget news 2024: Customs duty on gold and silver has been reduced to 6% which may lead to a decline in domestic prices and perhaps lift demand

Gold custom duty lower in Budget 20240-25: Shares of jewellery companies rallied up to 12 per cent on the BSE on Tuesday, July 23, amid heavy volumes after Union Finance Minister Nirmala Sitharaman announced a reduction on basic custom duty on gold and silver from 10 per cent to 6 per cent in India Budget 2024-25.

Including the 5 per cent Agriculture Infrastructure Development Cess (AIDC), which remains unchanged, the total import duty on gold and silver is reduced from 15 per cent to 11 per cent now.

Following the development, shares of Senco Gold surged 12 per cent to Rs 1,054.75 on the back of a five-fold jump in average trading volumes. Titan Company share price, meanwhile, rallied 7 per cent to Rs 3,484.90, while Kalyan Jewellers gained 4 per cent to Rs 550 on the BSE in the intraday trade. In comparison, the BSE Sensex was down 0.73 per cent at 79,917 at 01:27 PM.

 

Customs duty on gold and silver was reduced to 6 per cent that may lead to a decline in domestic prices and perhaps lift demand. The existing duty on gold and silver is 15 per cent, which comprises 10 per cent of basic custom duty and 5 per cent as AIDC, said Hareesh V, Head of Commodities, Geojit Financial Services.

 "As a result, the price of gold reacted lower on MCX by falling more than Rs 2,000 to Rs 70,350, and silver by Rs 2,500 to Rs 86,600 as the market prices in the lower import duty gap of 4 per cent. The broad view remains volatile and weak as Comex gold stays below $2415," added Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

On its part, Titan Company, in its Q1FY25 quarterly business update, had said that high gold prices (20 per cent growth Y-o-Y) and their continued firmness had an impact on consumer demand. Coupled with lower wedding days, overall sentiment were relatively muted in comparison to Q1FY24. Domestic growth came largely through increase in average selling prices whereas buyer growth was in low single digits.

"Increasing regulations in the jewellery retail industry, aimed at improving transparency and standardisation, over the recent years have accelerated the shift in the market share from the unorganised players to organised ones. The industry tailwinds are expected to benefit the organised jewellery retailers like Senco Gold over the medium term, supported by its expanding retail presence. An expected rise in the share of studded jewellery is also likely to increase the company's margin over the medium term," rating agency ICRA said in its rationale.