Shares of jewelery companies
Despite the tremendous rise in gold prices, shares of jewelery companies have not been able to support it. The situation is that gold prices have increased by more than 70% in the last one year, but shares of 8 out of the top 10 jewelery companies in terms of market cap are in loss on Dalal Street. Barring Titan and Thangamayil Jewellery, whose shares have risen 17% and 72% respectively, shares of other big jewelery companies have fallen by up to 44%. This shows a clear difference between the prices of gold and jewelery stocks.
PC Jeweler is the biggest laggard, whose shares have fallen 44% in a year. After this is Senco Gold, whose shares fell 43.5%. Shares of Kalyan Jewelers have fallen by 35% and shares of Sky Gold & Diamonds have fallen by 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 for the rise in gold prices and fall in the shares of jewelery companies, but experts mainly consider three reasons for this. About which Pravesh, Senior Technical Analyst, Swastika Investmart tells that.
Increase in cost of raw materials: For jewelers, gold is not a part of profit but a 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, customers postpone purchase or buy lighter jewellery, due to which sales decrease. This effect is more visible during wedding and festival seasons.
Lack of liquidity: Jewelery companies with high debt are being affected by rising interest rates and cash crunch. However, Titan has been able to perform better than other companies due to its strong brand, better pricing power and proper inventory management.
Changes in customer behavior
According to Sonali Shah Shetty, founder of Sohnaa, due to high prices, some customers are waiting, while some are buying now in the hope of further increase. There is demand due to weddings in India. People are now buying jewelery small and thoughtfully. He told that the trend from 22 carat to 18 carat and 14 carat gold is gradually increasing.
What will be the trend going forward?
Choice Institutional Equities believes that even though gold prices are high, the future of the jewelery sector is strong. The organized jewelery market is growing rapidly and is expected to reach around ₹5 lakh crore by 2029. However, Pravesh Gaur says that investors should be cautious at the moment and it would be better to bet only on companies with strong brands and good balance sheets.
Which jewelery stock is better?
According to experts, Titan remains the strongest choice in the sector. At the same time, some brokerage houses are also taking a positive view on B2B players like Shanti Gold International and Shringar House of Mangalsutra.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.