Gems & Jewellery Industry Analysis

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Must know facts:

The demand for the gold ornaments comprises of more than 80% of the domestic jewellery
consumption along with other precious metals.
India is one of the largest exporter of gems and jewellery jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. India’s gems and jewellery sector contributes about 15.71 per cent to India’s total merchandise exports.
The sector employs over 4.5 million workers and contributes to 6% – 7% of the Gross Domestic Product (GDP) of the country.
US, Hong Kong and UAE accounted for 75 per cent of the total gems and jewellery exports from India during FY 2016-17.

Influencing Factors for price change:

Import duty on gold is an important factor to monitor any price changes.
Gold futures market is equally important to monitor as it acts as a support to judge demand & supply dynamics in the market. Gold most often is a cyclical bet as it directly accounts to movement of money from equity markets to Bullion markets, when equity markets around the world displays sings of contraction.
Any change in standards/guidelines from – The Bureau of Indian Standards (BIS), which is a standard on gold hallmarking in India.
Trends to a certain extent can be known by benchmarking against – ‘S&P BSE CONSUMER DURABLES’ indices. This will help you analyse general trend in the consumer durables market based on which you can analyse if jewellery stocks are under performing or in line with market.

Understanding the Industry:

Gems & Jewellery (G&J) industry has acquired prominence over the years in the country, given its dual utility of improving aesthetics as well as investment. The sector employs over 4.5 million workers and contributes to 6% – 7% of the Gross Domestic Product (GDP) of the country. Besides being an important foreign exchange earner. India is the largest consumer of gold besides being the largest player in diamond cutting and polishing. Accordingly, the fortunes of the companies in this sector are closely linked to the global demand supply dynamics and exchange rate changes.

Looking at things traditionally, Indians have always bought jewellery for festivities, weddings and other special occasions through their trusted neighbourhood or family jeweller. But in recent years, a trend seems to be evolving whereby increasing number of individuals (especially from metros) are opting for branded jewellery which is driving the growth of organised retail jewellery. The change in trend is due to a number of factors like brand consciousness, wider variety of designs at different price points, hallmarking and certifications of gold and diamonds and exposure to global jewellery fashion & media. Domestically, gems & jewellery (G&J) has been a highly unorganised sector with approximately 300,000 traditional neighbourhood jewellers across India, organised penetration being about 17%.

India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. India is the world’s largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 75 per cent of the world’s polished diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC).

Estimated Market Size:

Gold demand in India rose to 454.4 tonnes between January-September 2017. India’s gems and jewellery exports stood at US$ 24.89 billion in April-December 2017. During the same period, exports of cut and polished diamonds stood at US$ 17.2 billion, thereby contributing about 69 per cent of the total gems and jewellery exports in value terms. Exports of gold coins and medallions stood at US$ 1,736.02 million and silver jewellery export stood at US$ 3,114.85 million during April-December 2017.

Road Ahead:

India is expected to play a more import role in the global gems & jewellery sector, with diamond miners setting up auction centres in India and with significant investment seen in the retail end of the sector by domestic players, foreign players and private equity investors.

Although retail sales of diamond jewellery slowed in the key consumption regions of China and India, the overall retail market continued its growth in 2012, extending its recovery from the financial crisis. While a predominant portion of gold jewellery manufactured in India is for domestic consumption, a significant portion of rough, uncut diamonds processed in the form of either polished diamonds or finished diamond jewellery is exported.

– Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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Top Stocks in the industry:

Rajesh Exports, PC Jeweller, Vaibhav Global & many more.

(Please note above stocks are not recommendations, they are purely for information purpose only)

Information Source / References: GJEPC, ONICRA, Care Ratings,IBEF, The Economic Survey 2016–17 & 17/18, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports

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