Jewellery Stocks Lose, Gold ETFs Gain As Govt Raises Import Taxes On Precious Metals

Stocks of gold and jewellery companies declined on the bourses while gold ETFs (exchange-traded funds) surged as the government raised import duty on precious metals to conserve forex.

The stock of Titan, maker of Tanishq-branded jewellery, fell as much as 1.6 per cent on Wednesday. The stock opened 0.25 per cent lower at Rs 4,043.95 compared to the previous close of Rs 4,054.05 apiece.

It further declined to Rs 3,987.55, which was 1.6 per cent lower than the previous close. However, the stock later reversed the day’s losses to trade with marginal gains.

Similarly, the stock of Kalyan Jewellers also declined by up to 6 per cent after opening lower at Rs 346.25 and further falling to Rs 340.10 apiece.

Gold and jewellery stocks have been on a losing streak since Monday after Prime Minister Narendra Modi urged citizens to stop buying gold for a year in the fight against the economic crisis looming due to the Gulf war.

While gold and jewellery stocks traded in the red, gold ETFs surged on expectations that buyers may shift to these instruments instead of purchasing physical gold amid price pressure caused by increased import tax.

Nippon India Gold ETF was trading more than 5.5 per cent higher, while Tata Gold ETF was up 5.4 per cent. Similarly, HDFC Gold ETF gained more than 5.3 per cent on Wednesday. ICICI Prudential Gold ETF was also trading at a premium of more than 5.6 per cent.

The government has decided to raise import duty on gold and silver from 6 per cent earlier to 15 per cent in order to curb non-essential buying of gold.

Since India imports almost all of the gold it consumes, the precious metal is one of the significant contributors to the country’s current account deficit.

While other major contributors to India’s import bill, such as fuel, fertiliser, and edible oil, help the economy grow, most gold is bought by retail customers for investment purposes.