Titan, Kalyan Jewellers, other jewellery stocks in focus as Centre hikes gold customs duty to 15%

Synopsis

The central government has significantly increased customs duty on gold and silver imports to 15%, impacting jewellery stocks like Kalyan Jewellers and Titan Company. This move aims to curb demand, narrow the trade deficit, and support the rupee, though it may lead to postponed purchases for consumers.

Shares of Kalyan Jewellers, Titan Company, Senco Gold and other jewellery stocks will be in focus heading into trade on Wednesday after the central government hiked customs duty on imports of gold, silver and other precious metals, with the revised rates taking effect from midnight.

Following the revision, the total customs duty on gold and silver has been raised to 15% from 6% earlier. The government has imposed a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports, taking the effective import tax to 15% from 6%. Platinum and related precious metal components such as hooks, clasps, clamps, pins and screw backs used in manufacturing will also attract a 10% duty.

The higher duties could dampen demand in the world's second-largest consumer of precious metals, although they may help ‌narrow India's trade ⁠deficit ⁠and support the rupee, one of Asia's worst-performing currencies.

The sharp increase in import duty on gold and silver is likely to be viewed as a near-term negative for jewellery companies as higher duties could push up domestic gold prices and weigh on consumer demand. Costlier jewellery may lead buyers to postpone purchases, particularly in price-sensitive segments. However, organised players could still fare better than smaller unorganised jewellers due to stronger brands, better inventory management and higher customer trust.

The move comes days after Prime Minister Narendra Modi, during a speech in Hyderabad on Sunday, urged citizens to reduce fuel consumption, use public transport, avoid foreign travel and refrain from purchasing gold for one year.

India has been trying to curb gold ‌ imports in recent weeks and began levying a 3% integrated goods and services tax (IGST) on gold and silver imports, prompting banks to halt imports for more than a month.

As a ⁠result, April imports fell to a near 30-year low. Banks have since resumed imports after paying the 3% IGST, but imports are now likely to fall again following the increase in import duties, bullion dealers told Reuters.

Gold has long been regarded as one of the most reliable long-term assets for Indian families, especially during uncertain times. Beyond its financial value, the precious metal holds deep cultural significance in India, symbolising tradition, security, weddings, household savings and generational wealth.

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