Stable Outlook for India’s Domestic Jewelry Retailers

(IDEX Online News) – India Ratings and Research (Ind-Ra) has reiterated its prediction of a stable outlook for jewelry retailers in India, according to a report in The Economic Times.

Ind-Ra said that it expected retailers to fair relatively well, underpinned by sustainable domestic demand, increasing preference for branded jewelry and fading regulatory headwinds. The research organization predicted that domestic jewelry demand will remain robust, with growth thought to be 3 percent to 5 percent in 2016.

Unlike the All India Gem and Jewelry Trade Federation (GJF) and the Gem and Jewelry Export Promotion Council (GJEPC), the agency argued that the excise duty hike announced in the recent budget and the mandatory PAN card requirements for purchases above Rs 200,000 ($3,014), will only marginally impact demand in the near term.

In terms of exports, Ind-Ra expects more challenging economic conditions, with fiscal headwinds taking the form of slowing Chinese demand for diamond jewelry and further pressure on margins, due to the divergence in rough and cut and polished prices.

The agency said that although producers had reduced prices by around 17 percent in 2015, most of that downward movement occurred in the second half of the year – and was a response to the midstream’s refusal to purchase unprofitable rough.

Despite the introduction of more flexibility in payment, deferment of Sights and guiding down of rough production since the start of the year, the rough price index remains higher than the cut and polished index, meaning that a significant improvement in profitability is unlikely to return in the near term.