Jewellery firms surge after RBI eases gold norms

MUMBAI Thu May 22, 2014 4:13pm IST

An employee explains the bill to a customer as gold bangles are placed on top of it inside a jewellery showroom in Mumbai August 30, 2013. REUTERS/Danish Siddiqui/Files

An employee explains the bill to a customer as gold bangles are placed on top of it inside a jewellery showroom in Mumbai August 30, 2013.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - Shares of jewellery companies such as Titan Co Ltd(TITN.NS) surged on Thursday after the Reserve Bank of India (RBI) allowed banks to provide gold loans to the sector, while also expanding the number of private agencies that can import the precious metal.

The moves by the RBI, announced late on Wednesday, should increase supplies of gold and brighten the earnings outlook for jewellery makers after the government took tough measures to curb imports last year, analysts said.

Although the two steps alone are not expected to impact India's current account deficit, they could reinforce expectations that RBI and finance ministry officials will soon move towards removing some of those curbs.

Restrictions on the import of gold were widely credited for helping the current account deficit shrink to 0.9 percent of gross domestic product in the December 2013 quarter compared with a record high 6.5 percent a year earlier, sparking a recovery in the rupee from record lows hit in August.

"Possibly, there will be a $7 billion to $8 billion pickup in gold imports in a year due to this relaxation which is unlikely to put much pressure on the current account deficit and therefore the rupee," said Pradeep Khanna, head of foreign exchange trading at HSBC in India.

Titan shares closed 6.8 percent higher, while Gitanjali Gems Ltd (GTGM.NS) gained 11.9 percent. Other gainers included Tribhovandas Bhimji Zaveri Ltd (TBZL.NS) and Shree Ganesh Jewellery House (SHRG.NS).

After Wednesday's measures, more than 20 entities, including banks and agencies will be allowed to import gold. Meanwhile, the resumption of gold loans to jewellers, stopped last year, will make it easer to fund purchases.

Economists and traders now expect other restrictions on gold imports such as high import duties to be also taken off. The decision rests with the new government.

India's incoming prime minister, Narendra Modi, who led Bharatiya Janata Party to a decisive victory in a just-concluded election, has indicated his willingness to remove gold curbs.

"The current tweak in regulation possibly hints at a direction that gold related restrictions have peaked and the curbs on gold imports will be eventually be relaxed, albeit gradually," said Siddhartha Sanyal, an economist at Barclays.

(Editing by Rafael Nam and Prateek Chatterjee)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

RK Laxman Dead

RK Laxman Dead

'Common Man' cartoonist RK Laxman dead at 93  Full Article 

Banking Revolution

Banking Revolution

India turns to corner shops, mobile phones for banking revolution.  Full Article 

Nuclear Group

Nuclear Group

China urges India to take steps to satisfy standards of NSG  Full Article 

Gold Market

Gold Market

Chinese gold demand holds up ahead of holiday, Indian buying weak  Full Article 

India-U.S. Relations

India-U.S. Relations

Column - U.S. and India should join to balance China's rise  Full Article 

Padma Bhushan

Padma Bhushan

India honours Bill Gates with civilian award  Full Article 

Fashionable Modi

Fashionable Modi

When Modi met Obama, his name was all over - his suit  Full Article 

New Greek PM

New Greek PM

Greek leftist Tsipras sworn in as PM to fight bailout terms  Full Article 

Australian Open

Australian Open

Venus fireworks illuminate Australia Day  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage