Gold Stocks Lose Luster Despite Precious Metal's Record Run

Despite the record-high price of gold, most yellow metal-dependent stocks underperformed in March. While the precious metal has touched a new record high almost every week so far in 2024, most jewellery stocks and non-banking lenders dealing with gold fell in last month of the financial year gone by.

Bullion prices in India surged to a new high of Rs 69,720 as of April 5, due to multiple triggers such as geo-political tensions and expectations of a rate cut by the US Federal Reserve.

On the Multi Commodity Exchange Ltd., gold futures for June delivery soared as high as 0.63% intraday to hit a fresh high of Rs 71,080 per 10 grams on Monday.

March was rather grim for investors, who had parked their money on the assumption that jewellery stocks and non-banking lenders dealing with gold would replicate the movement seen in gold prices. 

Kalyan Jewellers India Ltd., Titan Co., and Muthoot Finance Ltd. were the only companies that saw their shares gain in March. During the same time, jewellery companies like Renaissance Global Ltd. and Uday Jewellery Industries Ltd. saw a decline of 25% and 19%, respectively.

Companies like Muthoot Finance Ltd. and Manappuram Finance Ltd. have gained strongly and reclaimed their record highs, replicating the recent surge in gold prices, according to Ajit Mishra, senior vice president-research, Religare Broking. "We could see some breather after this move, but the tone is likely to remain positive."

Participants can consider accumulating them on dips, he said.

The main reason for this is that rising prices are dampening investors' sentiments, leading to a decline in sales. During a gold rally, jewellery stock trades are mixed, according to Mishra. "(Investors') focus should be on financing companies and selectively on jewellers."

But, to be sure, on a year-to-date basis, the companies have given a return of almost 54%, led by the recently listed Motisons Jewellers Ltd. Uday Jewellery Industries and Muthoot Finance were the only companies to have given negative returns on a year-to-date basis.