Summary: Expectations of strong sales this festive season have led to a sharp run-up in shares of jewellery retailers in the past few months. For instance, shares of Kalyan Jewellers and PC Jeweller have rallied up to 380% so far in fiscal 2023, while Titan is up 3% as compared to a fractional decline in the BSE Sensex during this period. Going by past trends, jewellers could see bumper sales this Dhanteras riding on high pent-up demand after a Covid-19 lull, and softening in gold prices. As per HDFC Securities, the first 10 festive days have already clocked 20% jewellery sales volume growth. Analysts remain fairly upbeat on jewellery stocks as they expect this trend to continue going forward. Deepak Jasani, Head of Retail Research, HDFC Securities says, have positive outlook on jewellery retailers. Sector to benefit from peak season till February. Pent-up demand leading to more buying. Investors need to keep valuations in check. The upbeat outlook has also been backed by the industry in their recent pre-quarterly updates. For the July-September quarter, Titan said it saw a healthy 18% yearly growth in its jewellery sales, while Kalyan Jewellers’ overall sales grew 20% on positive consumer sentiment and increased store walk-ins. The latter added that it has seen significant benefits from the ongoing shift in demand towards branded retail outlets. This transition among shoppers from traditional, small retailers to national chains is another key factor making analysts positive on the space. AK Prabhakar, Head of Research, IDBI Capital says, consumer shift towards organised players a key positive. Sector seeing structural bull rally on likely market share gain. No material impact for companies due to low gold prices. Inventory losses to be manageable on YoY basis. Among stocks, IDBI Capital’s Prabhakar remains bullish on Titan and Kalyan Jewellers from a long-term perspective. Though, he does not expect the sector to mirror the recent rally in the short term, as the Street has already factored in festive season gains. Today, foreign flows and global cues will guide the markets. Besides, the Q2 earnings of three Nifty companies -- IndusInd Bank, Nestle and UltraTech Cement will also be tracked.
