Investment in Tribhovandas Jeweller's - An Opportunity for Long Term Investor

Tribhovandas jeweler is ones of the most respected jewelers in North India for their quality product in the gold segment. They entered into the equity market with full fanfare but faced the turbulent time post dismal performance. Management quickly identified the gap and move strategically to start increasing its footprint through franchisee model in tier 2 and tier 3 cities. 

The stock price stumbles from 180 level to 60 INR in the last one year. Company in recent quarter made respectable profit and the market capitalization's is also under 500 Cr.

As global economy is again entering into economic crisis thanks to confusion created by UK referendum coupled with unrest in Middle East. The lack of economic growth and the signal supported by US Federal Reserve indicate the investor to turn towards Gold and the price went above $1400 ounce. 

It is expected that the gold price will cross $1550 in coming quarter. At the same time, Indian economy is coming on track and the monsoon  is tracking in the right direction which in turn will give more bump to gold buyer community during festive time especially in tier 2 and tier 3 where Tribhovandas already showing their presence. 

It will help company to increase their margin and subsequently increased profitability which will attract retail investor towards the company equity. In my point of view, the stock price may jump more than 50 % very quickly with little good news flow from the company.

Disclaimer - Consult your financial consultant before investing

Investment in Gold – Negative Return Expected for Indian Investor

The Indian investors with mind-set of investment in gold for good return in short to long terms are going to get crude shockwaves. The current domestic gold price is maintaining 26500 to 28000 INR range due to continuous fall in Indian Currencies against US $. The fall in Indian Currency negated the negative impact of major fall in International Gold price level. When International Gold price was around $1450 then also Indian domestic gold price was hovering around 28000 INR. The fall of Indian currency from 53 to 60 reflects 12% drop whereas International Gold price fell 20%. Post US FOMC meeting and comment from US fed regarding QE tapering, the cascading impact of it is going to settle down in next few trading session but at the same time, going to positively impact investors’ confidence about potential growth moment, return of higher interest rate regime, under controlled inflation number. Positive monsoon prediction, Expected government action to raise FDI cap in multiple sectors, Policy clarity on Fuel Supply to power companies, Gas pricing and etc may act as catalyst for Indian Currency rebounding back to 54 to 55 levels. The continuous fall of International Gold Price which is expected to fall further, potential Indian Currency rebound will negatively impact Indian Domestic Gold Price. I believe that, one should be surprised if Indian domestic gold price falls to 22000 INR in next 6 month. Any investor buying gold purely on investment purpose should be ready for negative return. In my upcoming post, I will give reason why equity investment is better than Gold given the high inflation and other Economic KPI’s

Reliance Capital Initiate Steps to Help Curbing Gold Imports in India

Reliance Capital demonstrates proactively approach to suspend Gold related Fund, Loan and Financing to curb Gold Import. According to CNBC TV18 exclusive report, Reliance capital suspended subscription to Reliance Capital Gold Saving Fund. The current AUM of Reliance Capital Gold Saving Fund is INR 2271. Company also decided to suspend physical gold sales to investor. In the midst of growing concern of Indian Current account deficit and Balance of Payment; Reliance Capital initiative must be applauded and should be followed by other companies importing gold unabatedly. In May Import and Export Data, Gold import contributes around 17% of total import. The Gold Import in May valued at $8.3Bn contributing 40% in growing Trade deficit. I believe that under Corporate Social Responsibility, Gold Importing Companies may consider taking Reliance Capital path not only to help country but to extend help to Indian Citizen experiencing indirect impact of gold import.

India Gold Import Policy May Initiate another slide in Global Gold Prices

As per World Gold Council, Total Gold demand for Q1 2013 stands at 963 Tonnes. Global Jewellery demand stands at 551 tonnes. India and China accounted for 62% of Q1 2013 global jewellery demand. In case an Indian government gets successful in curbing Gold import then it would have an adverse impact on overall global supply and demand scenario. The current Gold level pricing in India is sustainable at 26k to 27.5K per Oz due to Indian INR conversion against Dollar. The fall in orders from India is going to create low demand vs. high supply environment and in-turn may initiate another Gold price slide on global level.

The Indian Government move is going to be very productive for black marketer of Gold in India and it would definitely create secondary grey gold market. One should not blame Gold import cost the main reason for Current Account Deficit but should also think of inflicting positive investment environment so that Investor should be willing to Invest in India.

New Gold Policy to Curb Import May Backfire – Knee Jerk Impact

One of the main concerns of Indian Government and RBI is to curb unwarranted Gold import to reduce Current Account Deficit. In recent months, gold import tax reached to 8% to manage CAD and in turn to protect India from further downgrade from leading rating agencies. In the beginning, the government initiative looked very promising but got diluted with drastic fall in Indian Currency Viz-a-Viz major global currencies. Two days back, Government and RBI came out with blow out regulation targeted towards Gold Imports for domestic consumption. The domestic companies can import Gold and Platinum only in cash which will increase cash requirements and interest cost. The Gold import companies now cannot use the credit facility. The immediate major impact got reflected on Titan equity price that experienced 35% plus crash. Being one of the most trusted brand and constant value creator for the investor, many professionals most preferred stock is Titan. Most of the leading analyst firm downgraded gold centric equity Target Price and EPS – Earning per share in current and next few financial year.