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India
By Zainab Morbiwala
January 2017 was an eventful month for the gems and jewelry industry in India with the announcement of two major initiatives. The first was made by the World Federation of Diamond Bourses (WFDB), which welcomed the Gem & Jewellery Export Promotion Council (GJEPC) as a full member of its organization. The other announcement sent a positive signal to investors: Beginning this March, the Indian Commodity Exchange (ICEX) will enable investors to trade in diamond futures. The Securities and Exchange Board of India (SEBI) has already given its approval “in principle.” This initiative makes India the first country where polished diamonds would be traded on a commodity exchange.
The initial futures trading will begin with three contracts for stones sized .3 carats, .5 carats and 1 carat. In a press statement, Sanjit Prasad, managing director of ICEX, stated, “The futures contract will enhance the global competitiveness of Indian exporters who will be able to create inventory and hedge against price volatility, which will improve price competitiveness.” ICEX is being promoted by Reliance Capita and has MMTC, Indiabulls Housing Finance and IDFC Bank as major shareholders. A mock trading session to check the viability of the entire initiative and the system operations was conducted with 50 members who are already on board. Close to 100 people participated. ICEX has allied with International Institute of Diamond Grading and Research (IIDGR), which is owned by De Beers, for the grading and packing of the diamonds. The team at ICEX is optimistic that once this initiative rolls out, diamonds will be looked upon as a financial investment product, which up until now has not been possible, given the low transparency in pricing. According to a news report that appeared in the English daily The Hindu, the exchange is designing the diamond contracts in a manner in which individuals would be able to trade at a very low cost. The report stated that while one lot size representing 1 carat would cost only approximately $22 (Rs. 1500), investors effectively will be able to trade with just 5 percent of the money on margin. However, the exchange has kept the minimum physical delivery lot to 1 carat.
The impact of the demonetization move has seen a rise in price of medium- and large-sized polished diamonds by 2 percent to 3 percent. However, smaller goods have taken a hit, with prices of smaller diamonds showing a decrease of 2 percent, especially in the smaller towns of Gujarat. The small manufacturing units in Surat that were shut down immediately after the demonetization move was announced are gradually opening up, according to a statement by Dinesh Navadia, president, Surat Diamond Association (SDA). On condition of anonymity, a diamond dealer from Mumbai expressed his concerns about the industry getting back on track, first due to the overall global economic slowdown and secondly because of the aftereffects of demonetization within the country. According to him, as a result of the liquidity crunch, people are shying away from investing in jewelry. Furthermore, the requirement of submitting permanent account number (PAN) card details if the jewelry purchased is above Rs. 2 lakhs — approximately $3,600 — is only adding to the woes. While he appreciated all the initiatives being undertaken by GJEPC to boost diamond and diamond jewelry sales, he strongly suggested that the council take up the PAN card matter with the government and explore the possibility of relaxing that rule.
With individual and marketplace players like BlueStone.com, CaratLane.com, Jewelsouk.com and others cashing in on the online shopping phenomenon in India, the most recent entrant to jump on the bandwagon is Nakshatra by Mehul Choksi, chairman and managing director of Gitanjali Group. Nakshatra — www.nakshatra.world —features the branded jewelry exclusively along with designer clothing, giving it a competitive edge for those wanting to shop for clothes and jewelry together. The online portal has 40 celebrated fashion designers on board. Keeping in mind the way Choksi revolutionized the category of gold and diamond jewelry in India, this initiative from Gitanjali Group is poised to set a new trend in the online space. In a reversal of brick-and-mortar brands going online, CaratLane.com, which already had a store in New Delhi, opened its second store in Bangalore, spread across 1,000 square feet. The store also houses a “Solitaire Experience Lounge,” dedicated to exhibiting solitaire diamonds and CaratLane’s signature collections. This high-tech setting within a store attempts to bring the website to the customer, with all transactions ultimately made online. This move accentuates the selling potential of CaratLane’s signature collections in India, especially diamond jewelry.Article from the Rapaport Magazine - February 2017. To subscribe click here.
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