Real estate and jewellery stocks in Bengaluru have experienced a decline for the second consecutive day, as market participants react to Prime Minister Narendra Modi's recent call for austerity measures. On May 12, the Prime Minister urged citizens to limit gold purchases for the next year and to consider working from home to alleviate the ongoing fuel crisis stemming from conflicts in West Asia. This announcement has led to notable selling pressure in the stock market, particularly affecting key players in the real estate and jewellery sectors.
Prominent real estate companies, including Brigade Enterprises, Prestige Estates, and Puravanakara, have seen their stock values drop by as much as 3%. Similarly, major jewellery firms such as Titan, Kalyan Jewellers, and Senco Gold saw declines of up to 5%. Analysts at JM Financial have interpreted the Prime Minister's speech as a signal to the market, suggesting that it foreshadows potential fiscal and monetary measures that may be implemented if the geopolitical situation deteriorates further. They emphasize that such measures could help stabilize the Indian Rupee against ongoing depreciation pressures.
Market experts anticipate a gradual approach from the government regarding fuel prices, predicting that any increases may occur in increments. Additionally, there may be temporary reductions in Liberalised Remittance Scheme (LRS) limits and potential increases in gold import duties, particularly as the lean wedding season approaches. The significance of these measures cannot be understated, as oil constitutes approximately 20% of India's total imports, while gold accounts for 9%. Furthermore, around 58% of total remittances, which are projected to reach $30 billion in FY25, are allocated for international travel, with investments in equity also on the rise.
The implications of these austerity measures could be profound, particularly if the conflict in West Asia persists. JM Financial warns that prolonged geopolitical tensions could moderate India’s GDP growth to an estimated 6-6.5%, while the current account deficit (CAD) might worsen to 1.9% of GDP, posing risks to inward remittances. As such, the focus on increasing strategic petroleum reserves may become a priority for the government. This evolving situation continues to impact investor sentiment, underscoring the need for vigilance in the real estate and jewellery markets as they navigate the challenges posed by external economic factors.