After Narendra Modi dropped the demonetization bomb a few months back, there was a dip in gold sales. However, jewellery companies in the organised sector posted decent growth in the quarter between October and December.
According to insiders, there were two major factors that drew consumers. The first factor was that gold prices dropped by 11% to end the quarter at Rs 27,900 per 10g. The second factor was that there was a shift in the behaviour of consumers. They opted for more light weight gold ornaments that were diamond studded as opposed to heavy gold jewellery.
The shift in consumer behaviour allowed big brands like Titan and Gitanjali Gems, which are known for their gold jewellery collections, to focus their attention on retail as opposed to bulk business. Titan witnessed a 13% increase in net profit to post Rs 255.7 crore, on sales growth of 13.9%.
However, analysts are of the opinion that gold prices will continue to rally owing to their three-month highs on the domestic and international exchanges. Some of the analysts are of the view that gold prices in India can improve and hit the Rs 28,800 per 10-gram mark in the next quarter.
Therefore, it can be said that gold has both suffered and gained from the demonetization move. While some believe that the move has been neutral for gold, others believe the demand went up after demonetization. However, the cash crunch dented gold purchases significantly once the full impact of demonetization hit. How will gold jewellery collections fare in the next quarter? Wait and watch.
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