Rapaport Magazine

India Market Report

Volatile Gold Prices Hit Market

By Zainab S. Kazi
RAPAPORT... Gold prices have reached their zenith and this seems to be affecting the business of diamond trade in India. Coupled with the stalled U.S. economy, this is not good news for the industry, since another slowdown phase is indicated, which could go on for several more months.

Current Market Dynamics
“The market has been affected by the volatility in gold prices and oil prices and the fact that the economy in the U.S., which is the largest consumer of jewelry, is either slow or entering into a recession. The market was not good in 2007 and will probably face further problems for the next six months,” commented Sanjay Kothari, chairman, Gems & Jewellery Export Promotion Council (GJEPC).

Sunil K. Shah, marketing executive for Diacentre, admitted that “Since the U.S. slowdown, our business has been down by close to 30 percent.” Anand Joshi from Adesh International Private Limited does not foresee a market correction happening very soon, noting “The supply of rough being less, we will see a further increase in the price.”

Harsh Arora, chief executive officer (CEO) of Angel Jewellery Private Ltd, agreed that “In terms of market dynamics, the scarcity of rough has caused an increase in the price. The price of rough today is so high and basically everything pertaining to smaller-size diamonds that are used in jewelry has gone up. The demand for smaller sizes is very high and this includes goods with G to H, VVS quality. The availability of these products is scarce and the demand is just the opposite.” Arora is of the opinion that the goods that are in demand currently are facing problems with availability and the goods that are available in the market are not much in demand.

According to Kothari, bigger and better-quality diamonds are doing very well because of demand from India and China. Kothari said, “Compared to the U.S., what Indian manufacturers have started to look at now are other markets, which include the local Indian market, along with the Middle East and Russia.”

Talking about the movement of colored diamonds, Joshi feels that black is very slow but SI+ goods are moving well. For Shah, who largely deals with the market in Europe and Hong Kong, it is attractive colors that are moving well — blue, pink and green.

News from Industry Players
Flawless Diamond India Ltd has bagged an export order of precious stones to the tune of $9.5 million (Rs 38 crore) from Madrid Impex, which is based in Dubai’s free export zone. In other market news, Gitanjali, diamond jewelry manufacturer and retailer, continued its acquisition spree by acquiring a silver jewelry brand from Renaissance Jewellery and Trinity Watch for $6.2 million (Rs. 25 crore).

Budget Reaction
Sharing his comments on the budget, Tehmasp Printer, managing director of the International Gemological Institute (IGI), said, “The reduction in the customs duty from 10 percent to 5 percent is welcomed by the industry. In addition to being a very strong manufacturing base for diamonds, the reduction in the import duty will help the country become an important trading center and will attract more international customers.”

The first India International Jewellery Show (IIJS) Signature Goa, an invitation-only event showcasing the country’s top 98 manufacturers spread across 140 booths, was deemed “quite successful” by Kothari. “We plan to make it an annual event for at least three years,” he said. “Our motive of mixing business with pleasure was well achieved by this event.” The show drew close to 490 visitors, of whom 259 were individual foreign buyers, delegates and guests. During the show, a memo of understanding was signed by GJEPC and the Moscow Diamond Bourse providing that the bourse will act as a representative of India’s gem and jewelry industry in Russia and that GJEPC will set up a marketing office and showroom at the Moscow Diamond Bourse.

During the IIJS, the delegates from Pakistan and GJEPC decided to persuade their respective governments to include gems and jewelry in the items that could be traded between the two countries according to SAFTA (South Asian Free Trade Area).

The Marketplace
• Sales of size goods have been slow, due to a major rise in prices and 
  exchange rate fluctuations. Buyers are resisting until discount adjustments
  settle in.
• Manufacturing of small goods is not in full force, due to high asking prices  
  for rough and a shortage of rough in this category, leading to shortages of
  product to fill local and export orders.
• Demand is strong for -2 and melee goods but shortages persist across the 
• Movement is stable for 0.01 to 0.18 carats in I1+ goods in J+.
• Demand is good for 0.50, 0.70 and 0.90 carats in SI+, J+.
• Demand is consistent across the board for 1 carat.
• 2 carats have picked up movement after a sluggish period, despite price 
  increases of 5 to 7 percent.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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