Ind-Ra projects stable outlook for jewellers

India Ratings and Research (Ind-Ra) has maintained a stable outlook for jewellery retailers, while revising the outlook for exporters to negative for FY17 from stable in FY16.

Ind-Ra expects retailers to fare well underpinned by a sustainable domestic demand, shifting preference towards branded jewellery, and fading regulatory headwinds. Conversely, exporters might face temporary headwinds with slowing Chinese demand for diamond jewellery and are likely to have limited headroom to withstand further pressure on margins due to divergence in rough and cut and polished diamond (CPD) prices.

Ind-Ra expects domestic jewellery demand to remain robust and grow at 3-5% in 2016 to 670-685 MT because such demand remained steady at 600-670 MT over 2010-2015, despite gold price volatility on the back of wedding related purchases. The agency believes that the excise duty hike announced in the Union Budget and mandatory pan card requirements for purchases above Rs 2 lakh will marginally impact the demand in the near term. Government gold schemes such as gold bond and gold monetisation schemes are likely to have a neutral to positive impact on retailers in the medium term.