PNB fraud impact: Are diamonds still a safe investment bet?

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India as a nation is obsessed with jewellery. While gold has more often than not stood the test of time, diamonds seem to have lost their lustre, thanks to Nirav Modi. The multi crore PNB scam has seriously dented the brand value of diamonds.

“Diamonds are bought for three broad reasons -  investment in aspiration, desire to possess/wear them and as a symbol of love,” said Gems and Jewellery Trade Federation (GJF) chairman Nitin Khandelwal.

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But are there no takers for those precious stones among investors? Perhaps not.

“A diamond unlike gold is not fungible. Have varying cuts, colours, grades, and sizes, diamonds can never be exchanged for similar values as easily a piece of gold jewellery can be sold,” said Vipul Shah, former chairman at the Gems and Jewelry Export Promotion Council.

So what is the resale value of diamonds like? “When one goes to sell or exchange diamonds, unlike gold, it is not bought at existing market value. It can be more than the value at which it was bought or it can be way less,” said Khandelwal.

The most relevant issue with investing in diamonds according to experts is the existing of '4 Cs'. The cut, clarity, colour and carat of a diamond makes it unique and since there is no common, universal marketplace for diamonds, it becomes very difficult to compare two diamonds the same way one can compare two gold products.

While the demand for diamonds have gone up between 5% to 10% in the last ten years, Indians too have started buying them. Thanks to taglines like Heera hai sada ke liye and celebrities endorsing them, diamonds are something every entrant in the neo rich list would want to invest in. “The brand exercises have made diamonds directly related to expression of love. No one thinks of buying an engagement ring these days without a diamond on it,” said Khandelwal.

Jewelers couldn’t agree more. “People have usually seen gold as an investment traditionally. Diamond as an investment is being assured by branded stores in which customers can use their diamond to exchange for newer diamond jewellery at a current market price like we do. Unlike gold, diamonds cannot be sold anywhere and everywhere. However, the investment of diamond is more like investment in relationships. Women love diamonds and it is the best investment that a husband can do to make the relationship stronger,” said Suvankar Sen, executive director at Senco Gold and  Diamonds

To secure one’s purchase, it is important to ask for the certificate that certifies the diamond being bought. “While there are lots of labs which certify dimaonds, the best ones include the likes of Gemological Institute of America, International Gemological Institute and Hindustan Gemological Laboratories. But apart from the 4Cs, one should definitely check the fifth C - credibility of the brand,” Khandelwal suggested.

Cut to Nirav Modi. Since that’s where every conversation about diamond leads to these days-what happens to those insanely expensive diamonds he sold to his customers?

“Modi’s diamonds were sold on appointment in his diamond boutique and so we can guess how rich his clientele is. There is no reason why they would suddenly want to sell it suddenly. If you do not sell those diamonds, there brand value remains intact although we do not know how much of a value remains with his brand,” said Khandelwal.