Titan, Kalyan Jewellers & other gold stocks tumble up to 14% in two days after PM Modi's appeal. What lies ahead?

Shares of gold jewellers such as Titan, Senco Gold and Kalyan Jewellers extended losses for a second straight session after Prime Minister Narendra Modi urged citizens to reduce gold purchases over the next year amid the ongoing Iran-US conflict, raising concerns over pressure on foreign exchange reserves. Brokerages said the remarks could signal a potential policy shift ahead.

Speaking in Secunderabad, Hyderabad, PM Modi said lower gold consumption could help ease pressure on foreign exchange reserves and imports. The comments come as the Iran-US conflict keeps oil prices above $100 per barrel, with no near-term resolution in sight.

Jewellery stocks extend decline

Kalyan Jewellers India shares fell 4% on Tuesday to Rs 369.3 on the NSE, extending losses to over 13% in the two sessions since Prime Minister Narendra Modi’s comments. Titan Company, the Tanishq parent, declined over 2% today and about 9% over two days.

Senco Gold slipped 4% in intraday trade, while PN Gadgil Jewellers and Thangamayil Jewellery fell nearly 6%, with losses deepening to as much as 14% over the past two sessions.

What lies ahead?

Nomura highlighted that this marked the first time since the Iran war began when PM Modi called on citizens to adopt measures to conserve energy and foreign exchange. “While this is an appeal and the measures are not mandatory, they are an important signal, in our view,” it said.

The international brokerage noted that fiscal policy has been India’s first line of defence since the Middle East conflict began, which has minimised the growth-inflation trade-off but worsened the twin fiscal and current account deficits. “PM Modi’s comments signal that the pressure on government fiscal finances is reaching a tipping point, there is less appetite for further rupee depreciation, and the burden of adjustment may be incrementally shared with consumers,” it added.

Also read: PM Modi doesn't want you to buy gold for next 1 year. A bigger crash on the cards?

The government’s potential measures could include disincentivising non-essential imports like gold, tighter rules on outward remittances, a foreign currency deposit mobilisation scheme and a hike in domestic fuel prices, Nomura further said.

PM Modi’s remarks on delaying gold purchases should be viewed primarily from the perspective of India’s macroeconomic stability and import management, said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities. “India is one of the world’s largest gold importers, and during periods of elevated crude oil prices and global uncertainty, high gold imports put additional pressure on the country’s trade deficit and the rupee,” he said.

“The appeal is unlikely to significantly change long-term Indian demand for gold because gold remains deeply linked to savings, investment, and cultural buying patterns. However, in the short term, it may slow discretionary purchases, particularly in jewellery demand, and create cautious sentiment across bullion and jewellery-related businesses,” he added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)