Jewellery Sales Volumes to Report Growth in Dec Qtr After Three Quarters of Decline

Gold sales in volume terms have been declining since Q4 FY25, when a drop of 25 per cent was reported as per the data of the World Gold Council. In the subsequent Q1 FY26, the decline was 17 per cent and in Q2 FY26, it went up to 31 per cent as gold prices kept moving up, making continuous record highs. The muted volume growth is also attributable to old gold exchanges, which account for 30-45 per cent of the total sales for jewellers, though this provides a natural hedge to safeguard margins.

India Ratings and Research expects improved volume growth in the gold jewellery sector in 2HFY26, which will offset the decline in 1HFY26 and help sustain the recent trend of double-digit annual growth.

The rebound is likely to be driven by festival and wedding purchases, with increased demand and peak sales during the seasonally strong second half of the fiscal.

Additionally, the abolition of higher GST bands boosted discretionary spending on gold jewellery during festivities, though the GST applicable on gold remained unchanged.

The first signs of a demand trend reversal appeared when prices dropped about 6 per cent post-Diwali as buyers remained cautious yet optimistic. With prices staying high, customers adopted a non-deferral attitude, viewing elevated prices as the new normal, aiding gradual volume recovery.

Ind-Ra expects volume growth to rebound to normative level in 2HFY26. Value-driven growth is expected to materially boost overall revenue, leading to a double-digit revenue growth for the full year for jewellers.

Jewellers have enhanced their product mix by increasingly focusing on lightweight jewellery and on studded, silver, and jewellery sold at maximum retail price as these command better gross margins.

In a price appreciating scenario, some jewellers have not opted for active hedging of their inventory positions and have limited use of gold metal loans (GMLs) to benefit from inventory gains in EBITDA amid elevated prices. For Ind-Ra’s sample set of large jewellers with a strong and conservative credit profile, inventory funding has been largely through own funds or internal accruals, keeping reliance on external borrowings in check.

Despite price apprehensions, jewellers are confident about demand prospects, considering the strong pipeline of store additions. New stores have been increasing with a CAGR of around 15 per cent during FY23-FY25.