Ind-Ra Gold Outlook: Strong Retail Jewellery Rebound Likely To Sustain

India Ratings and Research (Ind-Ra) on Wednesday upgraded the retail jewellery sector's outlook to stable from stable-to-negative for FY22. Ind-Ra expects the momentum to continue in 4QFY21 and FY22, backed by a softening of gold prices and an economic rebound, with economic activity approaching pre-COVID peaks.

Following the US Federal Reserve's decision to maintain its accommodative monetary policy, gold prices in India have risen in sync with the global market.

"In 3QFY21, there was a good demand recovery due to the festive season, pent-up wedding demand, a 10% correction in gold prices during festivities from its peak in August 2020, and strengthened consumer sentiments as several COVID-19 vaccines were rolled out, all of which were in line with Ind-expectations," the rating agency said.

An overall economic recovery, robust demand from weddings, volumes stimulated by gold price correction, and overall growth in the underpenetrated rural segment would drive overall sectoral growth in FY22.

Because of the low base and traditional and cultural factors that sustain jewellery purchases, Ind-Ra expects the sector to rise 30 percent to 35 percent YoY in FY22. Despite the fact that the recovery in FY22 will be V-shaped, overall sectoral demand will only be 5%-10% higher than in FY20.

Ind-Ra's jewellery portfolio has a Stable rating outlook for FY22, owing to high brand recall, a geographically diversified reach, and sufficient liquidity.

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