New Delhi: The demand for jewellery in the quarter to end June, primarily driven by the marriage season and a couple of festivals, has been significantly washed out due to the nation-wide lockdown for more than 40 days. The demand for retail jewellery shall remain muted in 1HFY21; however, a sharp recovery is expected in 3QFY21 due to the festive and wedding season, said a report by India Ratings and Research (Ind-Ra).

Ind-Ra expects an overall 25 per cent year-on-year (y-o-y) decline in retail jewellery revenues over FY21.

The gold jewellery demand had already slowed down in FY20 in the tonnage and revenue terms due to the economic slowdown and increased gold prices. The possibility of a recovery of demand in FY21 has been derailed by the COVID-19-led lockdown and the subsequent continued economic slowdown in the country.

Ind-Ra already has revised its FY21 GDP growth twice since January 2020 to per cent and said a further downward revision is possible if the pandemic continues to evolve.

“This can have a prolonged negative impact on gold demand because of the possibility of a further reduction in the overall discretionary spend. The volatility in gold prices is also expected to hurt consumer sentiments,” the report stated.

Even after the lockdown gets lifted gradually across the nation, Ind-Ra expects muted demand outlook because of continuation of the social distancing norms, reduced footfalls in stores, and prioritisation of spends towards essentials and low-ticket discretionary items amid a squeeze on income levels.

As per the rating agency’s discussions with various jewellers, the online sales during Akshay Tritiya have been meagre because of the inability to provide delivery during the lockdown and the fact that many customers still prefer to see visit the stores personally.

The report said, furthermore, lack of festivities and maintenance of social distancing norms will remain a drag in 2Q, which is relatively lean period in a normal year. Currently, jewellery manufacturing happens in high-density workshops and the largest bullion and ornament markets such as Zaveri Bazaar in Mumbai, Chandani Chowk in Delhi and T-Nagar in Chennai are highly congested areas.

Also, customer interaction is a necessary part of retail showroom sales. Evolved social distancing norms shall remain a challenge which may restrict operating capacities of various jewellery manufacturers and sales of retailers.

Ind-Ra believes that the demand in 3QFY21 will be contributed by the pent-up weddings demand and major festival season. As per India meteorological department, monsoon rainfall is likely to be normal (96 per cent-104 per cent). Thus, Ind-Ra expects 3Q demand will be supported by a healthy post-harvest demand from the rural region.