Jewellery Prices Take Centre Stage During Wedding Season

Due to the fall in the rupee against the US dollar, investors are betting on gold as a safe investment. This saw a rise in gold prices

The domestic jewellery consumption growth (in terms of value) is expected to moderate to 6-8 per cent in FY2025, states ICRA in its latest report. The growth moderation, it added, will be on the back of a sharp rise in gold prices in recent months and the consequent impact on consumer sentiments of postponing non-essential purchases, from the sharp expansion of around 18 per cent in FY2024.

After a muted volume growth of around two per cent and four per cent in FY2023 and FY2024, respectively, ICRA has forecast a volume contraction in FY2025. Consumers, meanwhile, are expected to keep a watch on price movements and adjust to the new price levels over two or three quarters.

It stated that the share of recycled gold in the overall supply is expected to keep increasing and rise by 400-600 bps in FY2025, given the elevated gold prices.

Gold prices stabilised post-Akshaya Tritiya in April 2023, before witnessing an upsurge since November 2023 amid the wedding and festive season. Gold jewellers reported a revenue growth in FY2024 despite muted volume growth, as gold prices rose by approximately 14 per cent in the fiscal year on a YoY basis. The current gold prices, meanwhile, are higher by around 19 per cent over the FY2024 average and remain exposed to the confluence of factors like the global macroeconomic environment, geo-political tensions, inflation, and currency movements.

Sujoy Saha, vice-president and sector head, ICRA, said, “The revenue growth of ICRA’s sample set of 15 large jewellers, which accounts for ~75 per cent of the organised market, is likely to moderate to mid-to-high single digits in FY2025 (compared to an estimated ~16 per cent expansion registered in FY2024), due to subdued consumer sentiments and high gold prices despite robust store expansion plans and structural tailwinds. Wedding and festive demand is likely to be relatively muted amidst a relatively lower number of auspicious days in FY2025.” As per ICRA, the industry is estimated to post operating margin of around seven per cent in FY2024 and at a range-bound of 7-8 per cent in FY2025 amidst rising competition.

“Debt protection metrics are likely to improve, going forward, supported by steady accruals from operations and with an increasing trend in expansion through the asset-light franchise route by large retailers. The interest coverage is estimated to remain comfortable at over 7.0 times while the total outside liabilities to tangible net worth ratio is expected to improve to ~1.7 times in FY2025, against ~1.9 times in FY2024,” it added.

Furthermore, the report maintained that the store count of ICRA’s sample set of companies is estimated to have increased by around 21 per cent in FY24 after a 20 per cent rise in FY23, with large retailers on an aggressive store addition spree in the last couple of years. The trend is supported by customer preferences changing towards organised players. “The store additions are likely to continue in the near to medium term as well, although the players will remain watchful of consumer sentiments,” Sujoy Saha added.

After the festive season, the Indian market sees a surge in gold demand, especially during the wedding season. The demand for jewellery and coins increases significantly. According to the Lucknow Sarafa Association, the price of 24-carat gold is 81,100 rupees, 22-carat is 78,100 rupees, and 18-carat is 71,700 rupees per 10 grams.

Experts believe that the current decline in gold prices could be an opportune time for investment, but the US presidential election could lead to market volatility. Therefore, buyers should exercise caution before making a purchase.

Gold and silver prices have once again seen a rise. According to the All India Sarafa Association, prices have risen due to fresh purchases by local jewelers and retailers for wedding festivals.

Traders say that the demand of local jewelers has increased for the wedding season. Also, due to the fall in the rupee against the US dollar, investors are betting on gold as a safe investment. This saw a rise in gold prices.

There was no new reason to support gold prices due to the Fed's outlook and inflation moving towards the two per cent target. Trivedi says that profit booking in gold continued after Donald Trump's victory.