According to the latest RBI guidelines, banks and nominated agencies should retain 20 percent of every lot of gold import in customs bonded warehouses and more gold can be imported only if they export 75 percent of the stored gold.
BNP Paribas says the latest curbs on gold imports imposed by the Reserve Bank of India could be marginally positive for the jewellery industry.
Late on Monday, the country's central bank put further curbs on gold import mandating that banks and nominated agencies should retain 20 percent (or one fifth) of every lot of gold imports in the customs bonded warehouses. They will be able to import further gold only if they export 75 percent of that stored gold.
BNP Paribas analysts Vijay Chugh and Tapan Joshi say this policy is just one step short of imposing quantitative and value restrictions on gold imports, but should help boost exports.
"In our opinion, gold importers could incentivise gold exports by raising premiums on gold purchases for domestic consumption. Considering that the Rupee has also weakened considerably, we believe gold exports should certainly appear much more attractive," they said on Tuesday.
Gold exports as a percentage of gold imports have declined to an estimated 12 percent currently from 41 percent in FY2009. The new norms will help stem this declining trend in gold exports seen in recent years, the analysts said.
However, gold exports are estimated to be just 10-15 percent of imports and thus will need to go up significantly, they added.
In June, RBI had banned banks from importing on consignment basis for domestic consumption. It had also mandated that nominated banks and other agencies could import gold only on 100 percent cash basis, unlike using letter of credit (LC) benefits. This has now been withdrawn with the new norms in place and this Chugh and Joshi say is a welcome move as it should "alleviate working capital concerns."
BNP Paribas has maintained its "buy" rating on Titan Industries with a target price of Rs 337, saying these regulatory change raise the entry barrier to the industry and should therefore be favourable to stronger players.
Most jewellery stocks declined 2-6 percent in morning trade, but recovered later. Around noon, Titan Industries was up 4.6 percent at 271.70, Tribhovandas Bhimji Zaveri gained 7.3 percent to 213.40, PC Jeweller rose 15.4 percent to 85.80, Tara Jewels was up 6.5 percent to 128.05 and Shree Ganesh jewellery House was up 10.3 percent to Rs 73.85.
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