Rapaport Magazine

India Market Report

Diamonds Overtake Gold

By Zainab S.Kazi
RAPAPORT...Festival time in India is considered an auspicious occasion for investing in jewelry and for gifting, as well. It may come as a surprise that this country, which has been ruled by gold consumption, saw a change this festive season as the sale of diamond jewelry for the first time surpassed that of gold.
Import and Export Overview

According to a report by Reserve Bank of India (RBI), the country’s central bank, India’s gems and jewelry exports rose 21.5 percent to $9.38 billion in the first six months of the fiscal year — April through October — against $8.01 billion in the corresponding period last year. The growth in exports is fueled by strong demand from all international quarters, especially the U.S. and Hong Kong, per RBI.

According to provisional data released by the Gems and Jewellery Export Promotion Council (GJEPC), net exports of cut and polished diamonds for India for the period April to October 2007 totaled $8,160.35 million. That compares to $6,309.39 million from April through October 2006, for a 29.34 percent growth rate. Speaking of rough, for the period April through October 2007, exports from India were $309.20 million compared to $284.13 million during the period April through October 2006, which represents an 8.82 percent growth rate. Net imports of rough diamonds were $5,678.52 million for the period April through October 2007, compared to $4,626.61 million during April through October 2006, leading to a 22.74 percent growth. Imports of cut and polished diamonds for April through October 2007 stood at $2,668.01 million compared to $1,164.59 million for April through October 2006, for an impressive 129.09 percent growth.

Feedback on the Holiday Season

While most of the players appear satisfied with the sales for the holiday season, with many reporting much better sales this season than in the previous year, the common concern is the lower margins. “For this season, our sales are mostly concentrated in Israel as there is not much demand from the U.S. market,” said Rupesh V. Shah, director of R.T. Star Solitaires. “In terms of what is in demand, 50 points to 1 carat is selling well and D through I colors are picking up. Brown is doing well, too, but there is a scarcity of browns in the market. Below I, everything is difficult to sell.”

Rajendra Enterprises has created its own niche in the market and is well-known for its colored diamonds. Commenting on the sale of colored diamonds for this season, Rajendra Karnavat, proprietor of Rajendra, said: “The market for colored diamonds is on a rise at present and coated pink is selling very well. Browns are doing well, but the supply of them is not sufficient to meet demand and, hence, the prices for brown are high. This Diwali season, we also saw a rise in the demand for blacks, which caused a price rise of almost 50 percent compared to last year.”

Rajendrakumar A. Shah, partner, Rajendra Kumar, noted, “Anything above 1 carat is in good demand. Lower goods in smaller sizes are not selling well.”
Sharing information on lower margins, Rupesh Shah said that due to high prices of raw materials, the margins have gone down by 4 to 5 percent and that [slowed] payments from the U.S. were causing a problem. “While we receive payments from other countries in around three weeks’ time, the payments from the U.S. are being delayed by a good seven months.”

Karnavat said his sales this season rose by about 20 percent compared to the previous holiday season though he, too, agreed that the margins are getting lower due to the shortage of raw material and a hike in labor costs. Sales for Rajendra Kumar this season were up to Rajendrakumar Shah’s expectations, rising by approximately 5 percent.

Market Development

In line with its continuing expansion on many fronts, the Gitanjali Group has made yet another acquisition of a U.S.-based retail jewelry chain. In 2006, Gitanjali acquired Samuels; this year, it is Rogers Jewelers, which operates 46 stores in 11 states, for a price of $20 million. The company also announced a 50-50 joint venture with Morellato and Sector to launch ten international watch and jewelry brands in India.

The Marketplace
• Overall market is slow after the Diwali vacation and shortages persist in most categories across the board.
• -2 is in good demand with shortages across the board.
• Movement is slow overall in stars.
• Demand is good for melee in whites and browns with shortages persisting.
• Movement is slow for 0.08 to 0.18 carats.
• Movement is better for 1/5, 1/4 and 1/3 in SI goods.
• Demand is good overall for I1/I2 and VS+/I+.
• Demand is good for 0.70- and 0.80-carat collection goods.
• 0.90 to 0.99 carats are very hot with shortages in collection goods.
• Demand is very good across the board for 1 to 1.99 carats and premium sizes are difficult to find.
• 2 carats are stable.
• Shortages exist for 3 carats+ in rounds and fancies.
• Demand is very good and shortages persist across the board for 1.5 carat+, VS+, I+ in princesses, pears and marquises.
• Demand is strong for goods up to 1 carat in pears and marquises.

Article from the Rapaport Magazine - December 2007. To subscribe click here.

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