PC Jewellers, PN Gadgil, Kalyan Shares Plunge Up to 45%: Why Jewellery Stocks Aren't Mirroring Gold's Shine

While gold prices have surged over 70% in the past year, many jewellery stocks are failing to keep pace, with most of the top players experiencing losses. Despite gold's impressive rally, eight of the ten largest gems and jewellery companies (by market capitalization) are currently in the red on the stock market.

Specifically, while Titan and Thangamayil Jewellery have seen gains of 17% and 72% respectively, other prominent companies in the sector have experienced significant declines, highlighting a stark contrast with rising gold values. Some have plunged by as much as 44% within the year.

PC Jeweller has suffered the most significant drop, with a 44% loss in value. Senco Gold follows closely behind, with its stock price plummeting by 43.5%. Kalyan Jewellers' shares have decreased by 35%, and Sky Gold & Diamonds has seen a 38% drop. More recently listed companies like PN Gadgil, Bluestone Jewellery and Motisons Jewellers have also seen declines of 15%, 1%, and 45% respectively.

**Why the Discrepancy?**

Analysts point to several key factors causing this divergence between gold prices and jewellery stock performance. Pravesh Gour, Senior Technical Analyst at Swastika Investmart, notes that most listed jewellers have experienced corrections in their share prices, despite the surge in gold values. He identifies three main reasons:

• Increased Raw Material Costs:** Higher gold prices increase the cost of raw materials, also increasing working capital needs. This rise puts pressure on profit margins. Gold is a cost for jewellers, not a profit driver. Rapid price increases can reduce affordability and slow consumer demand.
• Weak Volume Growth:** As gold becomes more expensive, customers may postpone purchases or choose lighter jewellery options. This behavior results in lower sales volumes and reduced operating leverage, especially during peak wedding and festive seasons when price sensitivity is heightened.
• Lower Liquidity:** Rising interest costs and tighter liquidity conditions are impacting jewellers with higher debt and inventory funding requirements.

Sonali Shah Sheth, Founder and Creative Director at Sohnaa, notes that record gold prices are influencing buyer behavior, but the impact varies. Some consumers are waiting for prices to drop, while others believe prices will continue to increase and are proceeding with purchases. Cultural factors, particularly weddings in India, continue to support demand. Additionally, there's a steady demand from consumers who view gold as a long-term store of value, leading to smaller, more deliberate purchases.

Sheth also mentioned the rising interest in lower-karat gold, although the shift is gradual. Traditional 22kt buyers are becoming more open to 18kt gold, especially for designer jewellery, while 14kt gold is gaining acceptance for smaller gifts. Some brands are experimenting with 9kt gold, but it's too early to confirm this as a trend.

The weakening rupee further complicates the situation for gold buyers. A Mumbai-based dealer told Reuters that the falling rupee is making gold more expensive for Indian buyers, making it difficult for jewellers to decide on stocking levels.

**What's Next for Jewellery Stocks?**

Despite near-term challenges posed by rising gold prices, analysts at Choice Institutional Equities remain optimistic about the jewellery sector. They cite a structural shift towards organized players as a key factor. The organized jewellery market, valued at approximately ₹1,752 billion in CY23, is projected to grow at a CAGR of roughly 19.4% between CY23 and CY29E, reaching about ₹5,079 billion. This growth is expected to be driven by mandatory hallmarking, increased penetration of branded retail formats in Tier-2 and Tier-3 cities, and a rising preference for trusted brands.

While rising gold prices may temporarily reduce sales volumes, jewellery companies often benefit from higher inventory gains, which support margins. Conversely, during periods of gold price correction, higher volumes partially offset inventory losses. Companies with strong business visibility, operational stability, design agility, automation-led manufacturing, and flexibility across karat categories are well-positioned to navigate the upward trend in gold prices and offer attractive long-term investment opportunities.

Analysts suggest investors shouldn't avoid jewellery stocks entirely. Wedding-related demand is expected to remain a significant driver. The number of weddings is projected to remain stable at around 10-12 million annually through 2030, with average spending per wedding likely to increase due to population growth and rising income levels.

Gour advises a cautious approach, recommending focusing on stronger players with established brands and solid balance sheets. He suggests a selective, wait-and-see strategy until demand and margins improve.

**Top Stock Picks**

Gour's top pick in the sector is Titan. The stock is currently in a defined uptrend, forming higher highs and higher lows, and holding above its short- and medium-term moving averages. The stock's position above the 20-day and 50-day SMAs indicates sustained bullish momentum, while the upward trend of the 100-day and 200-day SMAs confirms a strong long-term trend. Momentum indicators also suggest a positive outlook. The ₹3,850–3,900 zone acts as immediate support, followed by a stronger base near ₹3,800, aligned with the 50-day SMA. A decisive move above recent highs around ₹4,000 could lead to a fresh breakout and continuation of the uptrend.

Choice Institutional Wealth is positive on B2B players like Shanti Gold International and Shringar House of Mangalsutra. Choice values Shanti Gold using the DCF approach with a target price of INR 350, giving it a BUY rating. This equates to an implied PE of 10.3x on an average of FY27-28 EPS and a PEG ratio of 0.37. Similarly, Shringar House of Mangalsutra is valued using the DCF approach with a target price of INR 295, with a BUY rating. This translates to an implied PE of 15.8x on an average of FY27-28 EPS and a PEG ratio of 0.67.

*Disclaimer: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor before making any investment decisions.*