 "jewellery, Gold jewellery")
Gold prices in India have increased sharply in recent months. On Tuesday, 10 grams of 24-carat gold cost Rs 72,480, much higher than Rs 63,970 on January 1.
In FY24, gold prices increased by some 14 per cent. Prices now are higher by around 19 per cent over FY24 average. Would higher prices deter consumers from buying gold jewellery?
ICRA says consumers to remain watchful
A note by rating agency ICRA said that domestic jewellery consumption, in value terms, is likely to moderate to 6-8 per cent in 2024-25 due to high prices. This will be a sharp moderation from 18 per cent in 2023-24.
Sales volume of gold jewellery is likely to contract this year compared to 2 per cent in FY23 and 4 per cent in FY24.
"Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters," it said.
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"Given the elevated gold prices, ICRA expects the share of recycled gold in the overall supply to continue to increase and rise by 400-600 basis points in FY25."
Sujoy Saha, vice-president and sector head at ICRA, said that the revenue growth of the agency's sample set of 15 large jewellers, which account for 75 per cent of the organised market, is likely to moderate to mid-to-high single digits in FY25. These jewellers registered a 16 per cent expansion in FY24.
According to Saha, this would be due to subdued consumer sentiments and high gold prices despite robust store expansion plans and structural tailwinds. "Wedding and festive demand is likely to be relatively muted amidst a relatively lower number of auspicious days in FY25," he said.
Store additions to continue
ICRA also said that the store count of the 15 companies increased by 21 per cent in FY24 after a 20 per cent rise in FY23. This was because large retailers pursued aggressive store additions in the last couple of years to gain market share with customer preferences changing towards organised players.
It is likely to continue this year.
"The store additions are likely to continue in the near to medium term as well, although the players will remain watchful of consumer sentiments," Saha said.
