Reserve Bank of India’s (RBI) decision to ease import restrictions on gold came as a breather for not just common man but also was the reason to cheer for all the jewellery companies. Gold prices reported the biggest intra-day fall in this year after it plummeted by up to Rs800 to 10-month low levels in major bullion markets of the country. Reacting to the breather, jewellery companies listed on the stock markets skyrocketed by up to 20 per cent.
In Delhi, gold prices plunged by Rs800 to Rs28,550 per 10 gram, the lowest level since August last year. In Mumbai, the price fell below the Rs28,000 mark dropping by Rs780 to Rs27,840 per 10 gram. The precious metal dropped by Rs800 to Rs28,310 per 10 gram in Chennai, while it lost Rs605 to trade at Rs28,340 per 10 gram in Kolkata.
Traders attributed the sharp fall gold prices to RBI’s decision to ease import restriction on the metal which triggered heavy sell-off by stockists. RBI allowed select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports.
There are expectations that RBI’s move would increase supplies and reduce prices in the domestic market, they said. RBI in July last year had imposed severe restrictions on gold imports in order to check burgeoning current account deficit and sliding rupee.
The central bank had tied imports with exports and prescribed a 20:80 formula. This facility was available to select banks only and other entities were barred from importing the metal.
A weakening trend in global markets, which normally sets price trend on the domestic front, too weighed on prices here. The rupee on Thursday strengthened by 30 paise to close at over 11-month high of 58.47 against the US dollar. A stronger rupee makes imports cheaper.
Welcoming RBI’s decision on easing the 20:80 gold import norms, the World Gold Council said this will help in increasing official supplies. In futures, the June contract of the metal trading 0.66 per cent lower at Rs27,190 per 10 grams after hitting a low of Rs27,151 earlier in the day on the MCX.
Meanwhile, both PC Jeweller (PCJ) and Tribhovansad Bhimji Zaveri (TBZ) skyrocketed by almost 20 per cent and ended Thursday’s session on the upper circuit. Shares of PCJ ended the session at Rs123.90 per share with a gain of Rs20.30. Shares of TBZ rose by Rs31.90 and closed at Rs191.75 per share. Shree Ganesh Jewellery House started the session up by 5 per cent and remained on the upper circuit throughout the day.
Titan, another major name in the jewellery industry, surged by 6.55 per cent and ended the day at Rs330.45 per share, with a gain of Rs20.30. Bangalore- based Rajesh Exports limited, country’s one of the biggest jewellery exporter, also surged by 11.10 per cent to Rs142.10 per share, rise of Rs14.20.
Commenting on the sharp rise in jewellery shares, Kunal Sraogi from Equity Rush said, “With RBI easing the import restrictions will be most beneficial for these companies as they import the precious metal on large scale. Also the fall in prices of gold would again attract common public to purchase which in-turn would improve their sales.”