Shares of jewellery companies gained momentum in a highly volatile trade on Budget day after the Finance Minister Nirmala Sitharaman proposed to cut the customs duty on gold and silver to 6% in the Union Budget 2024. Cheering the news, jewellery stocks such as Titan, PC Jeweller, Senco Gold, Kalyan Jewellers, Rajesh Exports, Motisons Jewellers, and Thangamayil Jewellery rallied up to 12% intraday. On the other hand, gold futures on the MCX witnessed sharp correction.
In her Budget speech, the FM announced a reduction on Basic Custom Duty (BCD) on gold and silver from 10% to 6%. Adding 5% AIDC, which remains unchanged, the total import duty on gold and silver is reduced from 15% to 11% now.
“As a result, the price of gold reacted lower in MCX by more than ₹2,000 to ₹70,350, and silver by ₹2500 to ₹86,600 as the market prices in the lower import duty gap of 4%. The broad view remains volatile and weak as Comex gold stays below $2415," says Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.
Hareesh V, Head of Commodities, Geojit Financial Services, believes that reduction in customs duty on gold and silver may lead to a decline in domestic prices and perhaps lift demand.
Senco Gold was the top performer with a 12% gain, followed by PC Jeweller with a 5% rally. Among others, Rajesh Exports, Kalyan Jewellers, Titan, and newly-listed Motisons Jewellers shares rose up to 5%.
Meanwhile, the BSE Sensex nosedived as much as 660 points, or 0.82%, to slip below crucial level of 80,000 to 79,677. In a similar trend, NSE Nifty plunged 215 points, 0.88%, to 24,294 marks. The broader market was the worst hit, with BSE midcap and smallcap indices crashing up to 3%.
The sell-off in the market was triggered after FM Nirmala Sitharaman, in her budget speech, proposed to hike short term and long term capital gains taxes. The FM has proposed to increase short term capital gains tax to 20% from current level of 15%, while long-term capital gains (LTCG) tax raised to 12.25% from 10% currently. In a slight respite to long term investors, long term capital gain exemption has been raised from ₹1 lakh to ₹1.25 lakh.
Besides, the government has also fulfilled a long-pending demand of the startup industry by abolishing the Angel Tax for all classes of investors. The decision is expected to bolster the Indian start-up ecosystem. To promote investment employment and social security, the Modi government has also reduced the corporate tax rate on foreign companies to 35% from 40% currently.
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