Despite the huge rise in gold prices, jewelery companies’ stocks could not support it. The situation is that gold prices have risen over 70% in the last one year, but shares of 8 of the top 10 jewelery companies in terms of market cap are losing on Dalal Street. Barring Titan and Thangamayil Jewellery, whose shares rose 17% and 72% respectively, shares of other major jewelery companies fell by up to 44%. This shows a clear difference between the prices of gold and jewelery stocks.
The biggest laggard is PC Jeweler, whose shares have fallen 44% in a year. This is followed by Senko Gold, whose shares are down 43.5%. Shares of Kalyan Jewelers fell 35% and Sky Gold and Diamond fell 38%. Shares of recently listed companies like PN Gadgil, Bluestone Jewelery and Motisons Jewelers have also fallen by 15%, 1% and 45% respectively in a year.
Gold price vs jewelery company shares
There are many reasons behind the rise in gold prices and decline in jewelery companies’ shares, but experts consider three main reasons for this. About which Pravesh, Senior Technical Analyst at Swastik Investmart tells.
Increase in cost of raw materials: For jewelers gold is not part of profit but part of cost. When prices rise rapidly, costs and working capital requirements increase, putting pressure on margins.
Decrease in sales volume: Due to expensive gold, consumers postpone purchases or buy lighter jewellery, leading to lower sales. This effect is more visible during wedding and festival season.
Lack of liquidity: Jewelery companies with high debt are being hit by rising interest rates and cash crunch. However, Titan has been able to outperform other companies due to its strong brand, good pricing power and proper inventory management.
Changes in consumer behavior
According to Sonali Shah Shetty, founder of Sohna, due to high prices, some customers are waiting, while others are buying now in the hope of more extra. There is a demand due to marriages in India. People are now buying jewelery small and thoughtful. He said that the trend of 22 carat to 18 carat and 14 carat gold is gradually increasing.
What will be the trend going forward?
Choice Institutional Equities believes that the jewelery sector has a strong future despite high gold prices. The organized jewelery market is growing rapidly and is expected to touch nearly ₹5 lakh crore by 2029. However, Pravesh Gaur says investors should be cautious now and bet only on companies with strong brands and good balance sheets.
Which jewelery stock is good?
According to experts, Titan is the strongest choice in this field. At the same time, some brokerage houses are also taking a positive stance on B2B players like Shanti Gold International and Shringar House of Mangalsutra.