Whalesbook
Modi's Speech Fuels Gold Rush Amid Policy Fears
Prime Minister Narendra Modi's recent call for less gold spending and delaying purchases has sparked a rush for gold across India. Consumers are rushing to buy bridal jewellery due to fears of higher import duties or GST changes, partly due to global tensions like the Gulf war. Jewellers report sales are up 15-20% as people buy gold before potential tax increases. This panic buying is particularly strong before the wedding season, which typically drives 50-60% of annual jewellery demand. The import duty on gold was subsequently raised to 15% from 6% effective May 13, 2026, a move designed to curb imports, narrow the trade deficit, and support the rupee. This duty hike reinforces consumer worries that drove the initial buying rush.
India's Gold Dependence and Monetization Plans
India is the world's second-largest gold consumer after China, a demand that creates economic challenges. With domestic production accounting for only about 1-2% of needs, the nation relies on imports for over 90% of its gold supply, amounting to a record USD 71.98 billion in fiscal year 2025-26. This heavy import dependence significantly pressures the country's trade deficit, which widened to USD 333.2 billion in 2025-26, and its current account deficit. The industry, represented by groups like the All India Gem & Jewellery Domestic Council (GJC), is proposing long-term solutions. A key proposal involves revamping the Gold Monetization Scheme (GMS) to facilitate the conversion of idle household gold—estimated between 40,000 to 50,000 tonnes—into dematerialised balances within the banking system. This aims to free up cash, reduce import reliance, and help stabilize the economy and currency reserves.
Jewellery Stocks: Titan vs. Senco Gold
The market also shows differences between major jewellery players. Titan Company, India's largest branded jewellery maker by value with a strong presence through Tanishq, exhibits a P/E ratio in the range of 75.36-81.4x, indicating a premium valuation often associated with growth expectations. Its stock has seen a positive 18.04% change over the past year. In contrast, Senco Gold & Diamonds, a leading chain in Eastern India and a rapidly expanding pan-India player, trades at a much lower P/E ratio, between 10.47-12.45x, and is considered attractively valued relative to peers and industry averages. Senco Gold's stock has shown more modest growth, with a 4.04% change over the past year. While Senco Gold presents a value proposition, analysts like Motilal Oswal maintain a 'Buy' rating on Titan Company with a target price of ₹5,000, suggesting sustained confidence in its growth trajectory despite its higher valuation.
Underlying Risks and Policy Patterns
This cycle of panic buying, driven by cultural demand for gold and government duty hikes, highlights the sector's structural issues. India's persistent dependence on imports makes its economy vulnerable to global price volatility and geopolitical disruptions, directly impacting its trade and current account balances. The effectiveness of past Gold Monetization Schemes has been limited, with only 38 tonnes monetised by March 2025 since its inception, raising skepticism about the proposed revamp's immediate impact. Higher import duties, meant to cut outflows, could also encourage the grey market and smuggling, which had decreased after previous tariff cuts. The big valuation gap between Titan and Senco Gold may signal market concerns, with Titan's high P/E at risk if growth slows, and Senco's lower multiple potentially reflecting operational risks or slower expansion. Duty rates have fluctuated: 15% in 2022, down to 6% in 2024-25, and back to 15% now. This suggests reactive policy, creating uncertainty for the sector.
Industry Outlook and Analyst Views
The industry's push for a revamped GMS is a strategic move to turn idle gold into a productive asset, potentially reducing future import needs. Short-term market sentiment depends on policy and global events, but underlying demand for gold, especially for weddings, remains strong. Analysts are positive on stocks like Titan and Kalyan Jewellers, expecting growth from mandatory hallmarking and the shift to organized retail, despite gold price swings and import pressures.