The unexpected abolition by the Indian government of the 80:20 rule in the application to gold imports (in which 20% of the volume of the imported metal is re-exported) last week caused an unprecedented rise in the quotations of many jewelry companies on the Indian stock exchange in just a few days. Companies such as Gitanjali Gems, Shree Ganesh and TBZ, grew at once by 20%; slightly smaller growth was shown by other major players of the Indian jewelry market, for example, Titan, PC Jeweller, Rajesh Exports and Tara Jewels.
Analysts attribute such a strong investor interest in the shares of these companies to the influence of two factors. The first is a direct benefit, which can grow as margins for gold have increased because of its limited availability, and it may decrease due to improved cash inflows in jewelry enterprises. The second is that the mood improved because of the unexpected nature of this announcement, which was made at a time when the government was actually waiting for reports of more stringent restrictions on gold imports. Speculation began last month, when the level of gold imports reached record levels.