Titan Industries Ltd. (TTAN) led declines among jewelers in Mumbai trading after India’s central bank tightened gold import rules prompting at least four brokerages including Goldman Sachs Group Inc. to cut ratings on the stock.
Titan fell 11 percent, poised for the biggest decline since June 12, to 242.65 rupees as of 1:58 p.m. in Mumbai. The stock had the biggest percentage decline on the BSE200 Index. Tribhovandas Bhimji Zaveri Ltd. (TBZL) dropped 6.8 percent, while Shree Ganesh Jewellery House India Ltd. slid 4.7 percent.
The Reserve Bank of India on Aug. 14 said jewelers need to make upfront payments for gold imports after an earlier notification mandated 20 percent of the precious metal bought from overseas be set aside for exports. The steps will raise financing costs for jewelers as they’ll have to borrow more to fund their purchases, CLSA Asia Pacific Markets wrote in a note yesterday. The brokerage cut their rating to sell from buy.
“Titan will be hit significantly as it’s a major player which doesn’t export much,” said Vivek Veda and Nitin Mathur, analysts at Espirito Santo Investment Bank. “Costs for end consumers will go up and it’ll give greater incentive for smugglers to bring in gold.”
JPMorgan Chase & Co. cut their rating on Titan to neutral from overweight. Goldman Sachs lowered their rating on the Bangalore-based retailer to neutral from buy. Credit Suisse also cut its rating on the stock to neutral from outperform.
India has raised import duties on the yellow metal three times this year and enacted further measures to limit the amount of gold purchased by banks and jewelers. Gold imports surged 87 percent to 383 metric tons in the four months through July from a year earlier after a slump in bullion prices spurred demand for jewelry, bars and coins.
Finance Minister Palaniappan Chidambaram plans to limit imports to 850 tons in the year ending March 31, compared with 845 tons in 2012-2013.
Consumption in India, which imports almost all the bullion it needs, accounted for about 20 percent of global demand in 2012, according to data from the World Gold Council.
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