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Shailesh Menon

US move to end duty-free entry is negative trigger

Mumbai , Sept. 29

They have lost their sheen, but not their sparkle," vouches an analyst tracking the gem and jewellery shares.

The slow slide in prices has made the investors a bit uneasy about trading in the `glittering stocks'. And the more optimistic ones are seeing this dip as an "entry point to this very promising sector."

Barely a month ago, stocks of companies such as Goldiam International, Gitanjali Gems, Classic Diamonds and Su-raj Diamonds went up between 12 per cent and 78 per cent month-on-month.

Robust industry growth, pre-season hustle and effective retailing were said to be the major reasons for the then spurt in stock prices.

Since then, the only negative trigger has been the US move to terminate the duty-free entry of Indian jewellery products under the Generalised System of Preferences (GSP).

"That will be harmful to both. On our side, there are no big issues except for the fact that we will have to compete with China, which pays an export duty.

"If the US tries to clog the export channel, it will leave the American retailers and buyers in the lurch. Indian jewellery is cheap and is in great demand in the US,'' said Mr Jatin Mehta, Su-Raj Diamonds and Jewellery.

India is not a major exporter of studded jewellery to the US. The focus is mainly on the European, Asia-Pacific and Gulf markets.

"The US ban may hit the export of large-cut diamond-studded jewellery and solitaire. But this is a very small segment. Even if the US bans free entry of Indian jewellery products, we are fundamentally strong to tide over the crisis. The sector is growing at 40 per cent, thanks to branding and domestic retailing,'' said Mr Rashesh M. Bhansali, Managing Director, Goldiam Intenational.

Stocks of several gem and jewellery companies continued its month-on-month dip on Friday.

Gitanjali Diamonds traded at Rs 193.85, down by 1.22 per cent on the BSE, while trading volumes were good.

Su-Raj Diamonds and Jewellery traded low at Rs 54.90, down five paise on Friday. The shares fell 5.75 per cent month on month.

Vaibhav Gems closed the day at Rs 279.90, down Rs 4.25 or 1.50 per cent. The share witnessed a 7.10 per cent fall over the same period.

"Pre-festive season sales, booming domestic retailing and good corporate growth will ensure growth. With several companies having subsidiaries in the US, most of them will have to pay only a transfer price (on semi-finished products) to the US government.

"Others will be able to add on transit costs to the price of the jewellery. So the situation doesn't appear to be that grave.

Investors can put money in companies with good fundamentals and management,'' said a market analyst.

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Gems, jewellery stocks lose sheen

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