Gold, silver customs duty hikes impact: Titan Company, Kalyan Jewellers, Senco Gold among stocks in focus today

Gold, silver prices: Jewellery stocks such Titan Company Ltd, Kalyan Jewellers India Ltd, Senco Gold Ltd, PN Gadgil Jewellers Ltd, Thangamayil Jewellery Ltd, PC Jeweller Ltd and Tribhovandas Bhimji Zaveri Ltd, among others, are likely to open in the red on Wednesday morning after the government reportedly raised import tariffs on gold and silver to 15 per cent from 6 per cent, as part of efforts to tame overseas purchases and ease pressure on the country's foreign exchange reserves. The move comes after the Prime Minister Narendra Modi’s earlier this week urged households to avoid buying gold jewellery for one year. PM Modi's appeals were seen as reduced policy appetite for further worsening of twin deficits, which triggered sharp market fall in the past two sessions.

The government imposed a ⁠10 per cent basic customs duty and a 5 per cent Agriculture Infrastructure and Development Cess (AIDC) on gold and ​silver imports, taking the effective import tax to 15 per cent from 6 per cent at present. Nomura had earlier suggested that the government may disincentivise non-essential imports like gold, and may include a potential hike to the customs duty on gold imports. It had, however, noted that gold shipments have been stuck at customs since March, owing to administrative delays.

Jefferies had noted that the Prime Minister’s appeal resembled the messaging seen during FY12-13, when the government and the Reserve Bank of India introduced a series of restrictions to curb gold imports and protect India’s external balances.

It noted tat India faced severe CAD stress during FY12 and FY13 as gold imports surged beyond $50 billion annually. At the same time, the rupee weakened sharply, depreciating nearly 20 per cent between January and September 2013. During that period, policymakers attempted to reduce discretionary imports, especially gold, which was seen as a major contributor to dollar outflows. The report noted that then Finance Minister P. Chidambaram had also publicly urged households to reduce gold purchases before a series of policy actions followed.

The higher duties are seen hurting demand in the world's second-largest consumer of precious metals. The move, however, may support the rupee, one ​of Asia's worst-performing currencies.