Kalyan Jewellers Rallies as Budget 2026 Skips Gold Duty Hike

Introduction: A Sigh of Relief for Jewellers

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, brought significant relief to India's gems and jewellery sector, sparking a rally in related stocks. Shares of major players like Kalyan Jewellers India Ltd. surged by nearly 5% as the budget allayed widespread fears of a hike in customs duty on gold. This stability in the tax regime is seen as a major positive, allowing companies to focus on growth without the immediate pressure of rising input costs and potential demand disruption.

No News is Good News: The Customs Duty Status Quo

For the jewellery industry, the most anticipated announcement in any budget is the customs duty on gold, its primary raw material. Ahead of the budget, there was considerable apprehension that the government might increase the levy to manage its fiscal position. However, the Finance Minister made no changes to the existing duty structure. The basic customs duty on gold remains at the level set in the July 2024 budget, when it was sharply reduced from 15% to 6%. That move was aimed at curbing rampant smuggling and making gold more affordable for consumers.

The decision to maintain the status quo in Budget 2026 provides a stable operating environment for companies like Kalyan Jewellers. A duty hike would have immediately increased gold prices, potentially dampening consumer sentiment and sales volumes in the short term.

Market Cheers the Budget Announcement

The stock market reacted swiftly and positively to the news. On the day of the budget, Kalyan Jewellers' shares climbed 4.94% to close at Rs 379.40 on the BSE. This was not an isolated event; the sentiment was sector-wide. Titan Company shares also gained 3.27%, while other jewellery stocks like Senco Gold also saw upward movement. This collective rally underscored investor relief and renewed confidence in the sector's near-term prospects.

Industry Expectations and Budget Outcome

While the absence of a duty hike was welcomed, the industry had been advocating for further support. The Gem & Jewellery Export Promotion Council (GJEPC) had submitted pre-budget recommendations urging the government to further reduce the import duty on gold, silver, and platinum from the current 6%. The council argued that a lower duty would help manage high prices, further discourage smuggling, and stimulate consumer demand. Additionally, proposals included lowering the Goods and Services Tax (GST) on gold to 1.25% and introducing a tax refund scheme for tourists to bolster India's position as a global jewellery hub.

Though these specific demands were not met, the stability offered by the budget is considered a significant win, preventing a negative outcome that could have strained the industry.

Understanding the Impact of Duty Changes

Historically, changes in gold import duties have a direct and often immediate impact on jewellery companies.

• Duty Hike: A higher duty typically leads to a knee-jerk reaction where demand falls in the immediate quarter as consumers postpone purchases due to higher prices. However, companies often benefit from inventory gains in subsequent quarters as the value of their existing stock appreciates.
• Duty Cut: A reduction in duty improves consumer sentiment and can boost sales volumes. Conversely, it can put pressure on margins as companies pass on the price benefits to customers amid intense competition.

By avoiding any change, the Union Budget 2026 has allowed the sector to bypass this cycle of disruption, enabling more predictable financial planning for companies like Kalyan Jewellers.

Financial Outlook for Kalyan Jewellers

A stable tax environment is crucial for Kalyan Jewellers as it executes its aggressive expansion plans. The company can now proceed with its growth strategy without the uncertainty of fluctuating raw material costs linked to tax policy. This predictability helps in managing inventory, pricing products competitively, and maintaining healthy operating margins. The positive market sentiment following the budget can also aid in capital raising and improving the company's valuation multiples.

Conclusion: Stability as a Catalyst for Growth

The Union Budget 2026 has proven to be a favourable event for Kalyan Jewellers and the broader Indian jewellery industry. By holding the customs duty on gold steady, the government has provided a stable and predictable policy environment. This move has averted a potential slowdown in demand and allows organized players to strengthen their market position against the grey market. For investors, the budget has reinforced the sector's positive outlook, paving the way for sustained growth driven by strong fundamentals and stable government policy.