The Indian jewellery sector stocks continue to be in the limelight after the government sharply increased the effective import duty on gold from 6% to 15%. 

The move, announced amid concerns around rising imports and pressure on foreign exchange reserves, has raised questions about jewellery demand, pricing and profitability across the industry.

The brokerage house Nomura, in its latest report has shared its outlook on the sector and has also maintained a positive stance on Titan Company.

Even after the sharp jump in import duty, Nomura has maintained a ‘Buy’ rating on Titan with a target price of Rs 4,950. This translates to an upside of 21% from the current market price.

The Rs 500 crore inventory cushion

One of the biggest talking points after the duty increase is the possible inventory gains for jewellery companies holding lower-cost gold inventory.

According to the Nomura report, jewellers carrying older duty-paid inventory may benefit from one-time gains because the replacement cost of gold has suddenly moved higher. For Titan alone, Nomura estimates inventory-related gains of more than Rs 500 crore.

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The brokerage noted, “Jewellers carrying lower-cost/duty-paid inventory will benefit from one-time inventory gains.”

However, the report also suggested that a large portion of this benefit may not directly flow into profits. Instead, companies could use these gains to support demand through discounts, festive offers and customer acquisition campaigns.

Furthermore, Nomura noted, “A large part of this gain could be passed on through promotions to acquire customers and drive footfalls.”

Which jewellery segments may get affected the most?

Nomura believes the impact of the duty hike may not be equal across all jewellery categories.

As per the brokerage house, gold coins and bars may see the biggest slowdown because investment-led purchases are more sensitive to price increases and government measures aimed at reducing discretionary gold buying.

The brokerage stated, “Coins segment could witness the most impact and meaningful moderation in sales.”

Daily-wear jewellery may also see some pressure because customers in this category are generally more price conscious. 

However, Titan’s increasing focus on lightweight jewellery and smaller-ticket products may help cushion some of the impact.

At the same time, the report expects relatively lower disruption in wedding jewellery demand. According to Nomura, wedding-related purchases are often unavoidable and less dependent on short-term price movements.

The brokerage added, “Wedding jewelry could see negligible impact given its statutory nature.”

Diamond jewellery is also expected to remain relatively stable because of lower direct dependence on gold prices and the presence of a more affluent customer base.

Smuggling risks rise, but organised players may still benefit

The sharp increase in import duty has also revived concerns around gold smuggling and the possibility of unorganised jewellers getting access to lower-cost gold.

The Nomura report added, “The sharp increase in duty materially widens arbitrage opportunities, increasing the risk of gold smuggling.”

The report highlighted that Permanent Account Number (PAN) details are mandatory for purchases above Rs 2 lakh, Goods and Services Tax compliance requirements have become stricter, and hallmarking norms are now compulsory.

According to the brokerage report, “Buyers may continue to prefer trusted and compliant jewellery players.”

What history from 2013 tells us

Nomura also compared the current situation with the gold import restrictions introduced in 2013 under former Finance Minister P. Chidambaram.

Back then, India had sharply raised import duties and introduced strict gold import rules to manage the current account deficit and rupee weakness.

The brokerage added in its report that Titan managed to navigate that phase relatively better than many smaller jewellers because of its sourcing flexibility, strong banking relationships and ability to access temple gold schemes.

The brokerage also pointed to Titan’s growing old gold exchange business as another support factor. Earlier, around 40% of sourcing came through exchange schemes, but that number has now increased to nearly 50%, helping improve affordability for customers.

What investors need to watch

Nomura continues to see Titan as relatively better positioned compared to several peers.

The brokerage expects the company to deliver an EPS compound annual growth rate of 20% between  FY26- FY29.

Nomura currently values the stock at 60 times its estimated March 2028 Earnings Per Share. However, the brokerage also cautioned that sustained high gold prices could remain a risk for overall demand growth in the jewellery sector going forward.

Disclaimer: The following analysis includes specific investment ratings and price targets from a third-party brokerage. This content is for informational purposes only and does not constitute an offer, solicitation, or a personal recommendation to buy or sell any security. Before making any investment decisions, particularly regarding large-cap stocks or sector-specific volatility, we strongly recommend consulting with a SEBI-registered investment advisor to align such actions with your financial goals and risk profile.

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