Prices of gold and silver are likely to rise after the government announced a change in the structure of duties. These changes could nearly double duties on both metals.
The import duty on gold has been set at 2 per cent of the value of imports from flat Rs 300 per 10 grams. Import duty on silver has been changed from flat Rs 1,500 per kg to 6 per cent of the value of the import.
"For the domestic markets, this is definitely not good news because already we were seeing little slump in the domestic buying especially in the month of December and now in January we are seeing demand pick up a little bit... But with this increase in duty...gold would become more expensive. There would be some effect on the demand again...at least for the short period that is because of the sudden hike in prices customers would wait and watch,” Rajesh Mehta, Chairman of Rajesh Exports told NDTV Profit.
These changes have come in response to a surge in gold and silver imports late last year. India's gold imports for FY12 are expected to touch $ 55 billion, a rise of as much as 60 per cent. The massive surge in gold imports has led to increase in current account deficit.
Stocks of Titan Industries, which owns jewellery brand Tanishq, closed flat after the government announced a hike in import duties on gold and silver. Rajesh Exports, manufacturer of gold & diamond jewellery, ended 2 per cent lower.
In contrast, the broader markets closed with big gains. The Sensex advanced nearly 275 points while the Nifty jumped nearly 2 per cent.
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