Nithin Kamath flags calm trade before midnight duty hike

What changed at midnight

India raised import duties on gold and silver to an effective 15%, with the change notified late on 12 May and implemented from midnight. The revised structure includes a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC). The effective rate earlier was 6%, according to the reports circulating on social media and in news wires. The duty hike also extends beyond just bullion. The notification applies to platinum and to jewellery and certain industrial imports linked to precious metals. It also revises duties on jewellery “findings”, which are small components used in jewellery making. Gold and silver findings now attract 5% customs duty, and platinum findings 5.4%. A key change highlighted in discussions is that gold imported from the UAE under a fixed-quantity quota system is now subject to the same duty structure, ending earlier concessional treatment.

Why the government raised duties now

The duty hike came days after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year. The appeal was framed as a national-interest step amid economic strain linked to the Iran war and wider West Asia tensions. Several posts connected the move to pressure on foreign exchange reserves and a rising import bill. Reports also linked the decision to the trade deficit and to supporting the rupee. One widely shared figure was the rupee touching an all-time low of 95.75 per dollar. A government source had told Reuters earlier in the week that there were no immediate plans to raise duties, which added to the surprise factor in online discussions. The move was described as part of a broader austerity drive to curb non-essential imports. Economists quoted in reports said higher tariffs could dampen demand in a major consuming market.

The Nithin Kamath-led discussion: “no tell” in the tape

The most repeated market microstructure point overnight was about what did not happen before the announcement. Social media posts discussing Nithin Kamath’s reaction focused on the lack of unusual moves ahead of the midnight notification. Specifically, users noted no abnormal changes in open interest in gold and silver contracts. They also flagged that prices did not show an early jump in the hours leading up to the news. The same was said about volumes, which were described as normal before the announcement hit. In other words, the market did not appear to “front-run” the decision in the visible data that retail traders track. That absence of a pre-move became a bigger talking point than the duty level itself in some trading circles. The observation resonated because the hike was both sharp and time-specific, arriving late at night. It also contrasted with the broader expectation created by earlier messaging that there were no immediate plans to hike duties.

What happened right after the duty news broke

While the pre-announcement tape looked calm to many traders, the post-announcement reaction was reported as sharp. One report cited gold and silver prices surging nearly 6% on MCX after the duty increase became public. That price action, if sustained, would align with the basic idea that higher import taxes raise landed costs. It also helps explain why traders were scanning for any early signal in open interest and volume. The jump was discussed as an “immediate” response rather than a gradual repricing. Traders also debated how much of the move was tax pass-through versus a risk premium tied to geopolitics. The government’s stated aim, as described in reports, was to curb imports and ease pressure on reserves, not to manage near-term futures pricing. Still, the market focus quickly shifted to domestic pricing and how fast jewellers would adjust rates. A second order discussion emerged around whether the new duty would widen the gap between official and grey-market pricing.

Who is impacted beyond bullion: jewellery, components, UAE flow

The notification was described as covering a wide range of items, not only standard gold bars. Posts and summaries said the higher duties apply to platinum and jewellery, and to industrial imports linked to precious metals. This matters because price changes can travel through manufacturing supply chains, not just retail buying. A specific line item that got attention was jewellery “findings”, such as hooks, clasps, clamps, pins, and screw backs. These are small, but they are essential inputs for jewellery manufacturing and repairs. Another widely noted change was the removal of concessional treatment for gold imported from the UAE under a fixed-quantity quota system. Under the new approach described in reports, the UAE flow faces the same duty structure. Separately, a think-tank view referenced online argued that tariff concessions under the India-UAE trade agreement should be reviewed, linking them to the rising share of imports from the UAE. That point became part of the broader “policy direction” debate rather than a narrow trading discussion. For investors, the key is that policy changes can hit both demand and supply channels at once.

The backdrop: IGST move and a recent import squeeze

The duty hike did not arrive in isolation, based on the timeline shared in reports. India had already begun tightening gold imports in recent weeks by levying a 3% integrated GST (IGST) on gold and silver imports. Market participants said this had forced banks to temporarily halt imports for over a month. Reuters also reported that April imports fell to a near 30-year low in that period. Banks later resumed imports after paying the 3% IGST, according to the same flow of reports. The new customs duty increase now adds another layer of cost and friction. Bullion dealers quoted by Reuters suggested imports could fall again after the duty rise. The government’s framing, as captured in coverage, was about conserving foreign exchange and managing the external account. Traders reading the sequence saw a clear direction of travel toward discouraging inflows. That context also explains why the midnight timing drew so much attention on social media.

Smuggling risk and the “grey market” concern

Industry voices in the reports warned that higher duties could revive illegal inflows. Reuters cited officials and dealers saying smuggling had eased after India cut tariffs in mid-2024. With the effective duty now at 15%, the incentive structure changes again, according to those comments. A Mumbai-based bullion dealer quoted by Reuters said grey markets were likely to become active because incentives to bring in gold illegally rise at current prices. Surendra Mehta of the India Bullion and Jewellers Association was quoted saying the hike was expected to curb the current account deficit but could affect demand when prices were already elevated. Separately, industry insiders cited in other reports also feared a resurgence of illegal gold inflows. These warnings matter because enforcement outcomes can shape how much of the tax becomes higher consumer prices versus higher unofficial premiums. They also feed into investor debates about whether repeated hikes are durable or reversible. The government’s goal is to narrow the trade deficit and support the rupee, but the market is simultaneously pricing in behavioural responses. That tension was a recurring theme in social conversations following the announcement.

Investor angle: sentiment spillover to listed jewellery names

Although the duty hike is a policy event, investors quickly connected it to the listed jewellery ecosystem. Earlier, after the Prime Minister’s appeal to cut gold buying, shares of Titan fell 6.73%, Kalyan Jewellers 9.27% and Senco Gold by 8.52%, as cited in one report. Those moves were tied to demand concerns and the policy signalling around non-essential imports. The midnight duty hike reinforced the same narrative of discouraging purchases and tightening flows. Traders debated whether the bigger impact would be on near-term volumes or on margins, depending on pass-through. Others focused on whether wedding-season demand can be deferred, which was explicitly referenced in the appeal. Another angle was the impact on financing and working capital for those dependent on imported inventory, especially if imports slow again. At the same time, some investors highlighted that policy intent is to manage external stability, which can support macro conditions over time. The immediate focus in online threads remained on how quickly retail prices adjust and whether a parallel market grows. For equity investors, the key takeaway is that sentiment can shift quickly when policy changes are sudden and large.

What traders and policy-watchers will track next

The first watch point is how imports respond after the duty hike, especially given the recent IGST-related slowdown. The second is whether domestic premiums widen, a common marker traders use to infer scarcity or informal supply. The third is whether enforcement actions or further notifications appear, since the current change modified earlier customs notifications issued in 2018 and 2021. Another monitor point is the rupee, which was cited as being under pressure in the same set of reports. Market participants will also track whether demand destruction actually shows up or whether buying shifts to different product categories. Industry voices have already put smuggling risk on the table, so any signs of grey market activity will be closely watched. For derivatives traders, the social-media observation about normal pre-announcement open interest and volumes will likely keep the spotlight on how information travels into prices. If future policy changes also arrive at unusual hours, this “no early tell” debate may resurface. Finally, investors will watch for any official follow-through on the broader austerity framing around non-essential imports. The policy objective is clear in the reporting, but the transmission into real-world flows will determine the market’s longer-term reaction.