Summary of this article
Jewellery stocks fell up to 11 per cent after PM Modi urged a one-year pause on gold buying
The move aims to curb import-driven dollar outflows amid high oil prices and geopolitical tensions
Broader markets also declined as rising West Asia tensions pushed crude higher and triggered selling pressure
Jewellery stocks including Titan Company, Kalyan Jewellers India and Senco Gold fell up to 11 per cent on May 11, a day after Prime Minister Narendra Modi urged citizens to postpone buying “non-essential” gold for a year, among other measures, to reduce pressure on India’s widening current account deficit.
At the end of the session, Titan shares closed lower by 6.72 per cent, Kalyan Jewellers fell 9.62 per cent, and Senco Gold plunged as much as 11 per cent before recovering slightly to close with 8.50 per cent in the red. Other jewellery stocks such as Thangamayil Jewellery, PN Gadgil Jewellers, PC Jeweller, Sky Gold and Diamonds, Bluestone Jewellery, and Goldiam International, among other gold stocks also settled in the negative territory.
Why PM Modi Want Indians To Stop Buying Gold
Addressing a rally in Secunderabad, Telangana, PM Modi announced, "I would appeal to people not to buy gold for weddings for one year." Along with this, the Prime Minister also urged citizens to reduce petrol and diesel consumption, use public transport and electric vehicles more frequently, revive work-from-home practices adopted during the Covid-19 pandemic, and prioritise domestic products.
“Petrol-diesel has become so expensive across the world. It is the responsibility of all of us that the foreign exchange spent on purchasing petrol-diesel should also be saved by conserving petrol-diesel,” the Prime Minister said.
PM Modi's appeal is aimed at cushioning India’s external accounts at a time when global conditions have turned increasingly uncertain, particularly due to rising geopolitical tensions in West Asia.
“The timing of the statement is important because India is currently facing a combination of higher crude prices, geopolitical tensions linked to the US–Iran situation, and pressure on the currency due to rising import bills,” says Jateen Trivedi, vice president, research analyst – commodity and currency, LKP Securities.
He added that large gold imports involve significant foreign currency outflows, primarily in US dollars, which adds to macroeconomic stress at a time when policymakers are focused on stabilising the rupee and managing external sector vulnerabilities. According to him, this makes it more important to discourage non-essential imports as part of broader economic management.
Gold is one of India’s biggest import items after crude oil and electronics. Unlike industrial imports that support manufacturing and exports, most gold imports are driven by jewellery demand, household savings, and investment buying.
This leads to billions of dollars leaving the country every month, which puts pressure on the current account deficit and foreign exchange reserves.
The situation becomes even more challenging when crude oil prices are also rising. India imports nearly 85 per cent of its oil demand, and ongoing tensions in West Asia have pushed global energy prices higher while also disrupting supply chains.
Higher oil prices increase India’s import bill, weaken the rupee, and strain dollar reserves. In such a scenario, heavy gold imports add further pressure on the country’s external finances.
Decline Also Comes Amid Rising Geopolitical Tensions
The decline in jewellery stocks also came amid a broader sell-off in the equity market. Domestic benchmark index Sensex fell up to 1,312.91 points, or 1.69 per cent, to close at 76,015.28. Likewise, the Nifty 50 lost as much as 360.30 points, or 1.49 per cent, to 23,815.85.
The broader market also mirrored the pressure, with the Nifty Smallcap 100 and Nifty Midcap 100 falling over 1 per cent each. The sell-off came after US President Donald Trump rejected Iran's latest offer to a US peace proposal, which sent crude oil prices higher, raising concerns that the 10-week-old conflict could drag on for longer.
Frequently Asked Questions
Q1. Why did jewellery stocks fall after PM Modi’s statement?
Jewellery stocks declined after PM Modi urged citizens to defer non-essential precious metal purchases for a year, raising concerns about weaker demand and impacting investor sentiment.
Q2. What is the objective behind PM Modi’s appeal?
The appeal aims to reduce import-driven dollar outflows, ease pressure on India’s current account deficit, and help stabilise the rupee amid rising global crude prices and geopolitical tensions.
Q3. Which external factors are adding pressure on India’s economy?
Rising crude oil prices, West Asia geopolitical tensions, and higher import costs are increasing pressure on India’s trade deficit and foreign exchange reserves.
