Jewellery Stocks – Hit By Demonetization or Still Strong

Jewellery and luxury goods companies are known to depend heavily on cash transactions. These areas suffered by the demonetization of Rs 500 and Rs 1,000 notes. Stocks of Jewellery and luxury goods companies slid up to 17% in intraday trade on Wednesday.

Analysts have made a statement saying these stocks could lose another 25% in the next two quarters as the government’s measure could impair earnings of these companies. They said that might happen because of possible attrition in demand due to a drop in discretionary spending by consumers.

A bulk of the consumption lies below the Rs 2-lakh threshold, above which it is already compulsory for customers to quote their Permanent Account Number (PAN). According to the analysts, currently, only 10-15 per cent of the transactions are done above the Rs 2 lakh level for most jewellers.  They have predicted that the flexible spending on jewellery may go down. There could be a liquidity crunch. Moreover, it would not be possible to use unaccounted money for transactions.

Tanishq’s subsidiary Titan, which produces luxury watches, felt the heat in yesterday’s trade. Titan share price fell 5.54% on the NSE on Wednesday to close at Rs 351. Titan is the top 500 recommendation for the quarter by Dynamic Levels. Luxury watchmaker KDDL was also scathed as KDDL share price slid 7.4% to close at Rs 258.8, while TBZ share price crashed 14% to close at Rs 68.

In the line of Jewellery, Rajesh exports share price slipped 2.30% to close at Rs. 456.80, Gitanjali gems share price declined 7% at 65.30. Both of these stocks are the top 500 recommendations by Dynamic Levels for the quarter. However, PC Jeweller share price managed to remain positive throughout the trade yesterday.

However, the table clearly indicates that the stocks are recovering from the shock. Still, it is always better to keep an eye on both, the movements of the stocks and the analysis by Street experts.

Analysts said that the impact will be experienced for the next few quarters, extending up to a year. Weakness and negative sentiment will continue in jewellery stocks in the upcoming quarters. Investors are better to stay away from the counters, suggest the analysts of the D-Street.

The government’s step spells more pain for the companies that had already been affected by higher gold prices, they said.

Titan share price had fallen up to 11% in intraday trade, before making a considerable recovery. Analysts attributed this to the company’s healthy revenue guidance and good festive season sales. The stock had reached a high of Rs 444 and that is a multiple hurdle level. When the stock again comes to near Rs 385, one can short it, suggest analysts.

 

Stock Name	% rise/decline yesterday	% rise/fall today
PC jeweller	0.74%	1.26%
Gitanjali Gems	-7%	5.56%
Titan	-5.54%	0.57%
KDDL	-7.40%	2.40%
TBZ	-14%	5.21%