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Slow IIJS Show Reflects Cautious Yet Optimistic Indian Market
Jul 21, 2014 10:45 AM
By Avi Krawitz
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RAPAPORT... The India International Jewellery Show (IIJS) ended on Monday with diamond suppliers reporting relatively low volume of trading and some softening of prices for select goods. The show began on Thursday, July 17 with visitors more focused on finished jewelry than on loose diamonds. The usual weekend spike in visitor traffic for IIJS didn’t materialize this year as it had in previous years.
“There is relatively small inventory [of diamonds] at IIJS and its more of a public relations exercise for diamond manufacturers,” said Pratik Shah, a partner at Star Rays, a manufacturer of 0.30-carat to 5-carat diamonds in all shapes and qualities. “We generally don’t expect big sales here but we do expect to meet new clients that we can then guide to our office.”
Diamond suppliers noted that there were fewer international buyers at the show than in previous years, suggesting that IIJS has increasingly become a domestic jewelry show. Shripal Masalia, a business development manager at J.B. And Brothers, which manufacturers 0.30-carat to 10-carat in all categories, added that there were a few serious buyers from Korea and China who placed orders at the show.
Similarly, there were fewer international exhibitors at the show with fewer companies than previous years participating in the Israel and Antwerp diamond pavilions. Rony Eitany, the president of Regent Diamonds, an Israel-based manufacturer of rounds and fancy shapes in sizes 3 carats and up to 20 carats and larger, urged more Israel companies to attend IIJS in order to create greater buzz around the Israel pavilion.
He reported that the show was positive, particularly as there is not a lot of competition in his niche of 3-carat and larger diamonds in the Indian market.
However, Eitany explained that the 2.5 percent import duty on polished diamonds made it very difficult for foreign companies to compete in the Indian market, especially on smaller goods. “The effect of the duty is less on the big sizes but local buyers still consider it in their costs. It makes doing business in India more difficult and sometimes prevents us from closing deals. But I look at the long term rather than at each show separately, and I believe that maintaining a constant presence at IIJS will pay off in the future.”
In the first budget of the new government, India's Finance Minister Arun Jaitley proposed raising the import duty on polished diamonds to 2.5 percent, which few exhibitors at IIJS opposed. “We don’t need to import polished, so it doesn’t affect us,” explained one manufacturer who requested anonymity.
Domestic Demand
Most agreed that slow trading during the show was not a reflection of international diamond demand as the focus at IIJS was on serving the diverse domestic Indian market.
“Success at IIJS doesn’t depend on footfall, but on how well you prepare for the show,” said Vipul Sutariya, the executive director at Dharmanandan Diamonds, a manufacturer of 0.01-carat to 50-carat diamonds in all shapes and qualities. “You have to do your research in order to understand what your customers want and you need to understand that trends are subjective and different for the various regions of the country.”
Buyers from north India, including from Delhi, were primarily looking for lower-color goods and those from south India focused on better color and clarity diamonds. Jewelry wholesalers reported steady sales at the show, but observed that retailers are still cautious and buying less than usual.
Tarun Jagwani, the chief operating officer of Saiesha Jewellery, a manufacturer and wholesaler of fine jewelry, noted that business has slowed in the past six to eight months “We’ve done well at the show but there was a cautious undertone,” Jagwani said. “Retailers are a bit overstocked and are making orders for lower volume of goods than before.”
Post Election Confidence
Nillesh Parrekh, the chairman of Shree Ganesh, a gold and diamond jewelry supplier, reported that gold jewelry demand has improved although buyers are still prudent and price conscious. He explained that buyers held back their purchases in the past year due to the volatility of gold and diamond prices, as well as in the rupee to dollar exchange rate.
The rupee depreciated sharply in 2013 and fell to a low of INR 68 to the $1 in September, which offset the decline in dollar-based gold prices. Gold in rupee terms rose, influencing further caution among retailers. The rupee has since rebounded and stabilized at around INR 60 to $1 in 2014.
The stable rupee has also helped to raise confidence in the local diamond and jewelry market, and overall sentiment was positive despite unremarkable trading activity at the show. Most who spoke with Rapaport News at IIJS agreed that the May election of a new government has spurred optimism about prospective economic growth and retail jewelry demand.
Benchmark for the Season
Dealers expect local Indian demand to improve in the coming months as the Diwali festive season approaches, taking place a bit earlier than usual this year – beginning on October 21.
A spokesperson for the Gem & Jewellery Export Promotion Council (GJEPC), the industry umbrella organization that organizes IIJS, explained that the show usually takes place in August but it was a month earlier this year due to availability of the Mumbai exhibition center and due to Diwali being earlier this year.
Some exhibitors suggested that it was still early for retailers to buy up inventory as the consumer market is still seasonably quiet and retailers have yet to observe a rise in consumer spending to spur confidence in their own polished diamond or jewelry buying. Rather, manufacturers expect a spike in wholesale demand toward the end of August and are currently increasing production in preparation for Diwali and Christmas seasons.
Mayank Shah, the marketing and sales manager at Asian Star, which manufactures polished up to 3 carats, noted that manufacturing is being kept under control and factories are cautious to not over produce.
In addition, suppliers expect more goods to be released by the Gemological Institute of America (GIA) in the second half of the year, reducing some of the backlog of goods being graded by the GIA. Already, manufacturers report that supply of 1-carat and larger goods on the market has increased as the GIA reduced its turnaround time of these diamonds.
As a result, suppliers reported that prices of 1-carat certified diamonds has softened slightly in the past few weeks and this was reflected at the show. Demand for GIA dossier grading reports remains strong, particularly for 0.30-carat to 0.60-carat, G-, VS-SI goods, and prices were firm at the show, with shortages due to the backlog at the GIA.
Those trends are expected to continue in the short term as Indian suppliers turn their attention to the international market ahead of the fourth quarter shopping season.
“IIJS was slow but it’s not a benchmark for overall market conditions,” said one supplier who requested anonymity. “Everyone came with a positive attitude because the mood in India has improved since the election. But the overall market is still a bit cautious and we are looking toward the September Hong Kong show for that benchmark. Hopefully things will have improved by then."
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Tags:
Avi Krawitz, diamonds, GJEPC, IIJS, India, jewellery, Jewelry, Rapaport
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