Budget 2024 Impact: Jewellery stocks continue to shine for 2nd day on customs duty cut; Kalyan Jewellers jumps 15%

Jewellery stocks continued their upward trend for the second consecutive day on Wednesday as investors reacted positively to the government's decision to lower customs duties on gold and silver. This policy change is expected to reduce domestic prices and potentially boost demand.

Amid this backdrop, jewellery stocks surged up to 8%, and the trend extended into today's session. Kalyan Jewellers India gained another 15%, reaching a fresh all-time high of ₹633.35 per share. Motisons saw its shares jump 7% to ₹165.75 apiece.

Similarly, shares of RBZ Jewellers and PC Jeweller hit the 5% upper circuit limit. Thangamayil Jewellery's shares increased by another 3.5% in today's trade after an 8% gain in the previous session, while Titan's stock also rose by 2.5%.

Budget boost

Finance Minister Nirmala Sitharaman on Tuesday proposed a reduction in basic customs duty on gold and silver to 6% and platinum to 6.4%. The reduction in the basic customs duty on gold, silver, and platinum has been a long-pending demand of the gems and jewellery industry.

On Tuesday, the government reduced customs duties on various products, including gold, silver, and critical minerals, to lower input costs, enhance value addition, boost export competitiveness, cut smuggling, and stimulate domestic manufacturing.

The basic customs duty on coins of precious metals, gold and silver findings, and gold and silver bars was cut from 15% to 6%. For gold and silver dore, the duty was reduced from 14.35% to 5.35%. Additionally, the levy on platinum, palladium, osmium, ruthenium, and iridium decreased from 15.4% to 6.4%.

Previously, the duty on gold and silver was 15%, including a 10% basic customs duty and a 5% Agricultural Infrastructure Development Cess. The new structure imposes a 5% basic customs duty and a 1% Agriculture Infrastructure & Development Cess (AIDC) on gold and silver imports, lowering the total import duty to 6%.

M. P. Ahammed, Chairman of Malabar Group, said, "The reduction in import duty on gold has been a long-standing demand for gold retailers, and we are extremely grateful to the Union Finance Minister for addressing this issue in today’s Union Budget by reducing the duty from 15% (including cess) to 6%. This move not only relieves consumers who have eagerly awaited this announcement but is also expected to boost gold demand in the country and create jobs for artisans."

"High import duty often leads to increased smuggling of gold through illegal routes, which hampers the growth of the organized retail gold trade and results in revenue losses for the government. It is expected that the duty reduction will drastically cut down on gold smuggling, thereby curbing illegal trade and enhancing tax revenues. This reduction benefits organized retail jewellers, consumers, and the government, making it a positive development for all parties involved," Ahammed added.

Sharp correction

Following the announcement, local gold prices fell 6% to 68,500 rupees per 10 grams on Tuesday, the lowest in over three months. Earlier this month, Indian gold prices had reached a record high of 74,731 rupees, which had dampened demand.

Jewellery demand in India, the world's second-largest gold consumer, has been robust, with gold imports increasing by 30% in 2023–2024, reaching $45.54 billion, according to media reports. 

However, this surge in gold imports is putting pressure on the country's current account deficit, impacting the value of the rupee.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.