India's largest jewellery retailer has revealed that the public is largely ignoring the government's repeated appeals to limit gold buying, signaling a strong cultural and financial attachment to the precious metal. Titan Co., a subsidiary of the Tata Group, reported a 63% surge in profit and saw higher foot traffic at its stores during the latest quarter, with the jewellery segment driving the bulk of its revenue.
This resilience comes despite a direct appeal from Prime Minister Narendra Modi in May urging citizens to pause gold purchases, coupled with a decision to more than double the import duty on the metal to 15% amid heightened tensions with Iran. Reinforcing his stance just last week, Modi again called on the public to refrain from buying gold for "non-essential" purposes.
According to Ajoy Chawla, Managing Director of Titan, the impact of these measures was fleeting, as demand is primarily determined by consumer sentiment regarding gold prices. He noted that the public's enthusiasm for gold remains robust, viewing it as a reliable store of value. "Even those who have no intention of selling their jewellery still consider it a core part of their investment portfolio," Chawla explained, adding that the love for gold as an asset class shows no signs of fading.
The recent oil price volatility has underscored India's heavy reliance on energy imports from the Gulf region, putting significant pressure on the rupee and foreign exchange reserves. Curbing gold imports is part of New Delhi's broader strategy to reduce the trade deficit and support the depreciating currency. However, data suggests these efforts are facing an uphill battle.
Statistics from the World Gold Council show that India accounts for roughly one-third of global gold jewellery demand. In the quarter ending June, the country's gold jewellery sales jumped by a third year-on-year to reach $21 billion. Modi’s plea to avoid gold, particularly during festivals and weddings where it holds deep cultural and religious significance, appears to have had little effect on consumer behaviour.
The demand surge was also evident in July, when the World Gold Council reported that major listed Indian jewellers posted robust quarterly results, with revenues growing between 30% and 60% year-on-year, fuelled by religious festivals and the summer wedding season. While a growing number of middle-class families are diversifying into equities and mutual funds, gold continues to hold its appeal as a preferred investment vehicle.
Ashok Sonthalia, Titan's Chief Financial Officer, admitted that even financially savvy individuals remain drawn to gold, stating, "Even if I am very financially literate, I would still invest in gold." Titan, which commands nearly a tenth of India’s vast and fragmented jewellery market, has seen its share price rise almost a quarter this year. In contrast, the blue-chip index Nifty 50, which includes Titan, has declined by nearly 9% over the same period. Analysts at Nomura believe Titan is well-positioned to benefit as consumer demand continues to revive after a period of stagnation last year.
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