gold: Setback or blip? Decoding jewellery stocks’ underperformance as gold hits fresh lifetime highs

While gold has been treading a path of glory hitting fresh lifetime highs on a regular basis since the beginning of March, the performance of jewellery stocks have been less than inspiring. A data on 18 jewellery stocks with a market cap of Rs 100 crore or more, analysed by ETMarkets, showed that 15 stocks have given negative returns of up to 19% in between March 1 and April 1 while just three of them have managed positive returns.

Gold prices on the MCX have shot up by 9.07% or Rs 5,722 per 10 gram since March hitting a lifetime high of Rs 69,487.

Data showed that 15 jewellery stocks with market cap of Rs 100 crore or more have given negative returns of up to 19% in between March 1 and April 1. Renaissance Global is the worst performer. The other notable laggards were Titan Company (-0.71%), Senco Gold (-5.49%), PC Jeweller (-7%) and Rajesh Exports (-7.25%). Only three stocks managed positive returns viz. Kalyan Jewellers India (6.61%), Radhika Jeweltech (1.18%) and Goldiam International (0.08%).

The underperformance comes on the back of strong rally in most stocks with four stocks giving multibagger returns in the past 12 months namely Kalyan Jewellers, Radhika Jeweltech, Radhika Jeweltech, Thangamayil Jewellery and Sky Gold.

“The jewellery sector has portrayed a laggard growth recently because the rise in the prices of gold and silver will have a negative effect on the revenue of the companies which in turn will affect the profitability of the companies in the sector which has led to increased investor caution. When the price of gold rises, jewellery becomes expensive,” Vishnu Kant Upadhyay, Assistant Vice President, Master Capital Service said. In his view, this could lead to consumers delaying purchases or opting for smaller, cheaper pieces.Non performance of certain stocks can also be attributed to their fundamentals not being great. Rahul Ghose, CEO of suggests Golkunda Diamonds and PC Jeweller as cases in point. “Golkunda diamonds for example has had poor yearly sales growth and has a low ability to service its own debt. PC Jewellers has been declaring negative results for the last few quarters and is negative EBITDA,” Ghose added.Meanwhile, the likes of Kalyan Jewellers and TItan have fared quite in the recent past, Ghose said, who does not see the recent spike in prices as a major headwind. For him the company’s balance sheet remains a key along with technical indicators amid lofty valuations.

Fundamental analyst Kranthi Bathini, Director-Equity Strategy at WealthMills Securities does not see the current spike in bullion price as a setback for jewellery stocks. Calling it a blip, he said that discretionary spending could take a hit but gold will always remain popular by virtue of being a hedge against uncertainties. He remains bullish on Kalyan Jewellers and Titan for a long term.

Commodity analysts Anuj Gupta of HDFC Securities echoes similar sentiments, opining them that there will be no impact on consumption which is largely demand based.

Upadhyay of Master Capital Service advocates long term investment strategy in jewellery stocks with proven track record and should be picked to diversify portfolio.

Ghose picked Senco Gold as a buy option arguing for significant institutional holding in the counter but not at current levels. Titan and Kalyan Jewellers are his preferred pick.

Nilesh Jain, Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking finds jewellery stocks currently in “speculative space”, recommending investors to avoid this pack. Like most analysts, he remains positive on Kalyan Jewellers on declines for levels of Rs 460-480 with a stop loss of Rs 410.

Not to mention that March series was laden with high volatility with Nifty ending with 1.6% gains.

Also Read: Gold vs Sensex vs Bitcoin: With over 62% returns, this asset class is leading returns in 2024 so far

(Inputs from Ritesh Presswala)

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

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