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Women may begin incorporating a mix of natural diamonds and lab-grown diamonds (LGD) into their jewellery collections, leading to a gradual increase in the adoption of LGD-studded jewelry, according to Kotak Institutional Equities report.
This shift is expected to be influenced by factors such as education levels, disposable income, and evolving fashion preferences. With LGDs available at significantly lower prices than natural diamonds, the jewelry industry is poised for change in the coming years. The affordability of LGDs may reshape purchasing patterns, offering consumers more choices while altering the dynamics of the traditional diamond market. Meanwhile, gold's role as a store of value remains strong, but its form of investment could evolve. Financial gold products like gold exchange-traded fund (ETF) may attract a larger share of household investments, potentially reducing the demand for physical gold jewelry. As these trends unfold, the jewelry sector is set for a period of adaptation and growth. While gold has traditionally been viewed as an asset that holds value over time, LGDs are emerging as an affordable alternative in the jewelry market. This shift could redefine how Indian consumers approach their gold and jewelry purchases. Despite a rising preference for equities as an investment option, gold continues to hold a dominant position in Indian households. Over the past decade, Indian households have purchased approximately USD 300 billion worth of gold, compared to USD 194 billion invested in equities. This trend suggests that gold remains a preferred savings instrument. The rise of LGDs and the shift toward financial gold could pose risks for jewelry companies in three key areas. First, revenue growth could be affected if households reduce their purchases of physical gold jewelry in favor of gold ETFs. Second, profitability may come under pressure as LGDs, which are cheaper than natural diamonds, gain market share. Lastly, stock valuations of leading jewelry companies could be impacted if these trends materialize, as current valuations do not fully account for these potential changes. While gold is expected to retain its status as a store of value, the way Indian households view jewelry is evolving. (ANI)
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