Shares of jewellery manufacturing companies across India experienced significant declines on Monday, with some firms seeing their stock values drop by as much as 12%. The market downturn was triggered by an appeal from Prime Minister Narendra Modi, who urged citizens to refrain from buying non-essential gold for the next year.
PM Modi's call is part of a broader strategy to bolster India's foreign reserves, as gold and crude oil imports represent a substantial portion of the nation's import bill. He also requested efforts to conserve fuel.
Major Players See Significant Drops
Among the hardest hit was Sky Gold and Diamonds, whose shares plummeted 12.25% to Rs 475, bringing its market capitalization to just over Rs 7,250 crore. This represented a nearly 13% fall from its 52-week high recorded just days prior.
Senco Gold Ltd also saw a sharp decline, cracking 11% to Rs 325.25, with its market cap slipping below the Rs 5,500 crore mark. Meanwhile, Kalyan Jewellers India Ltd was down 10% to Rs 382.20, pushing its valuation below Rs 40,000 crore.
Even the prominent Tata Group subsidiary, Titan Company Ltd, a major player in the gold market, experienced an 8% dip, settling at Rs 4,151.40. This drop shaved off a substantial portion of its market valuation, bringing it below Rs 4.7 lakh crore, and represented a 10% fall from its all-time high set on Friday following its Q4 earnings report.
Broader Market Impact
The impact wasn't limited to the largest firms. Numerous smaller jewellery players also felt the pressure, with stocks for companies like PN Gadgil Jewellers, Manoj Vaibhav Gems N Jewellers, Shringar House of Mangalsutra, Tribhovandas Bhimji Zaveri, RBZ Jewellers, Radhika Jeweltech, and BlueStone Jewellery and Lifestyle falling between 6% and 8% during early trading hours on Monday.
Why the Appeal? Conserving Foreign Reserves
Prime Minister Modi's appeal stems from the nation's ongoing efforts to manage its import bill and conserve foreign exchange reserves. Gold, alongside crude oil, consistently ranks among India's largest import categories, placing significant pressure on the country's trade balance. By encouraging a temporary halt in non-essential gold purchases, the government aims to reduce this outward flow of foreign currency.
A Historical Precedent
This isn't the first time India has seen a government appeal or intervention regarding gold imports. In 2013, then-Finance Minister P. Chidambaram implemented restrictions on gold imports to address a widening current account deficit. At that time, India faced intense currency pressure amid surging global crude prices, leading to its classification as one of the 'Fragile Five' economies. That period also saw the launch of an NRI deposit scheme that successfully mobilized approximately $25 billion, providing a historical context for the current measures.