Vote on account 2014: Jewellery stocks plunge as much as 5% as no duty cut disappoints

NEW DELHI: Jewellery stocks were witnessed a rally today ahead of Finance Minister P Chidambaram's interim Budget for FY15.

Tribhovandas Bhimji Zaveri, Gitanjali Gems, among others, were up by as much as 4 per cent in early trade. But at 12:24 pm, well after the finance minister had finished his budget speech, Gitanjali Gems was at Rs 123.40; down 0.88%.

Tribhovandas Bhimji Zaveri was at Rs 123.95, down 0.44%. PC Jeweller slipped to Rs 85.80, down 4.93%.

This bearishness at the counters was due to expectations of a duty cut on gold imports, especially after Congress president Sonia Gandhi last month wrote to the commerce ministry seeking a cut in the import duty on gold.

Ms. Gandhi is said to have also pushed for the relaxation of 80:20 scheme on the import of the yellow metal.

Gold imports fell to 19.3 tonne in November from a high of 162 tonne in May in the wake of a series of curbs by both the government and the RBI. These included raising Customs duty on standard gold to 10 per cent from 2 per cent to restrict imports that bloated the current account deficit to an all-time high of 4.8 per cent of gross domestic product, or $88 billion in 2012-13.

Besides, the RBI had in July introduced an 80:20 scheme - 20 per cent of the bullion imported had to be exported back. Imports were also not allowed if importers were unable to meet the 20 per cent norm. The government also banned trading of gold in special economic zones.

The measures had the desired impact of slowing down gold and silver imports to $25.5 billion in the first eight months of the fiscal, from $33.5 billion in the year earlier.

It may be noted that India used to be the world's biggest buyer of the bullion until the government introduced the curbs in order to contain a record current account deficit.