Why This Analyst Thinks Titan, Kalyan Jewellers Will Continue To Glitter After Budget Push

Phillip Capital was bullish on the jewellery sector in its post-budget review published on Tuesday.

What Happened: It had a "positive" rating on the industry after Finance Minister Nirmala Sitharaman proposed customs cuts on precious metals in Budget 2024. Titan Company, Senco Gold, Kalyan Jewellers and Thangamayil Jewellery stood out among the winners in the sector, according to the brokerage.

The brokerage believes that the reduction of duties for gold could lead to a 7.8% price cut. This is likely to have a positive impact on overall demand for jewellery, it said. 

"This would lead to a level playing field as unorganised players were discounting high as they were sitting on high MTM (mark-to-market) gains," Phillip Capital added in its note.

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Currently, unorganised businesses are able to offer deep discounts because they are benefitting from high unrealised gains on their investments, creating an uneven playing field where organised players may struggle to compete. The brokerage believes that the proposed change will correct this imbalance.

Companies that have gold-backed loans are also expected to face a one-time financial impact, according to Phillip Capital, as these companies have not hedged themselves against fluctuations in the cost of duties related to the loan. The effects of this will be noticeable in the second or third quarter of the fiscal year 2025.

Gold stocks soared on Tuesday after customs on the yellow metal were cut from 15% to 6%. Customs on silver were also brought down to 6% whereas platinum saw a decrease in customs duty to 6.4%.

Price Action: Gold stocks continued their gains over the budget optimism on Wednesday.

Titan was up 1.26% at ₹3,510.55, Senco Gold rose 0.03% to ₹990, Kalyan Jewellers added 6.43% to trade at ₹588.30 and Thangamayil Jewellery was trading 3.05% higher at ₹1,940.00.

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