Best Diamond Stocks to Buy in 2023

In India, the diamond (subset of gems & jewellery) industry is divided into several sub-categories. There is the broad gems & jewellery sector overall. There are cut diamonds, polished diamonds, and artificial diamonds and there are also higher end jewellery companies focused on stones and platinum. For a long time, India has been one of the leading centres for polishing and processing of rough diamonds. In India there are several diamond companies, which also deal in other aspects of jewellery and in retail.

What are diamond stocks?

What do we understand by diamond stocks? Here we look at the idea of diamond stocks as well as the  top diamond stocks in India. Diamond stocks are the gems and jewellery stocks that deal in diamonds apart from just gold. A big part of the diamond business is the polishing of the roughs, although this segment is still in the unorganized space and these companies are predominantly unlisted. Most of the diamond and the gems and jewellery companies that are listed are multi-faceted jewellery companies. Of late, lab grown diamonds are also a rapidly growing part.

Overview of diamond industry in India

India’s gold and diamond trade contributed 7.5% to India’s GDP and 14% to India’s total merchandise exports. The gems and jewellery sector employs over 8.3 million people, up from just 5 million in 2020. The Indian government declared the gems and jewellery sector as a focus area for export promotion. That is why it is relevant to focus on the best diamond stocks and the top diamond stocks in India.

The Government of India permitted 100% FDI in the sector under the automatic route, where foreign investors do not require prior approval from RBI or CCEA. Indian Government has inked Comprehensive Economic Partnership Agreement (CEPA) with the UAE in March 2022; allowing Indian Gems and Jewellery industry to boost exports. CEPA will provide duty-free access to the UAE market and India plans to triple G&J exports to the UAE. This will be a big boost for the best diamond stocks and also the top diamond stocks.

The overall market size for the gems and jewellery industry in India is around $78.5 billion with the US export market being the primary driver for global demand. For FY22, India’s gems & jewellery exports touched $39.14 billion, up 54.1% yoy. Over the next five years, the target is to take this figure to $70 billion, offering a huge window for the sector. That would be a big boost for the best diamond stocks as also for the top diamond stocks in India.

Why invest in diamond stocks

Apart from the global demand story, government has initiated key steps to boost exports of diamond and other gems & jewellery. Here are a few key measures.

a)    India has signed FTA with the UAE to boost exports to $52 billion. Revised SEZ Act is also expected to boost exports of gems and jewellery.

b)    Government reduced custom duty on cut and polished diamond and coloured gemstones from 7.5% to 5% and NIL. Hallmarking has been made mandatory. This is likely to give a fillip to identifying the diamond stocks to buy as well as to focus on the best diamond stocks to buy in India.

c)    Diamond exports will also get an indirect boost from reforms like revamped gold monetisation scheme, reduced import duty on gold (12.5% to 7.5%), hallmarking etc.

d)    The Finance Ministry amendment under Prevention of Money Laundering Act (PMLA), notifies dealers in precious metals and stones to maintain records of cash transactions worth Rs10 lakh and more. This will push more business to the organized segment.

Top 10 diamond stocks to invest in India

In this listing, we have focused on the top diamond and G&J stocks in India by market cap and have only considered stocks with a market cap of Rs200 crore and above.
 

Clearly, the diversified jewellery company from the Tata group, Titan, dominates the sector, although it is a diverse play on the jewellery sector. The table above is a good starting point to help locate the best diamond stocks to buy in India 2023 as well as to shortlist the best diamond stocks to buy.

Factors to consider before investing in diamond sector in India

It is said that good diamond investing is all about the four Cs i.e., Carat, Clarity, Colour and Cut. Just like identifying good diamonds is a tough task, identify a good diamond stock is also quite a challenge. For instance, a low quality may be a bad investment, but buying a large fancy diamond may see limited market demand. It is a dilemma between going higher on the value chain without making it hard to unload. That is where the 4 Cs come in.

•    The first “C” is Carat which is its mass measured in carats (200 mg) or points (2 mg). Bigger diamonds are of a higher value than smaller diamonds, but the value of a diamond does not consistently correlate with its carat.

•    The second “C” is Clarity of the diamond, meaning the visual appearance. While blemishes and surface defects reduce value, most investors cannot tell the clarity of a diamond with their naked eye.

•    The third “C” is Colour of the diamond and normally it is the colourless or white diamonds with greater transparency that have the highest value. However, they are also rarest.

•    The second “C” is Cut of the diamond. The cut is the only attribute of a diamond based on craftsmanship; and that is where the organized sector using skilled cutters add value. 

Now a word on diamonds as an investment in diamond stocks. First, the product. Is diamonds a good investment and if so what are the best diamond stocks in India as well as other good diamond stocks to buy. Diamonds are largely showpieces with no inherent economic value. Hence, the value of diamond and diamond stocks are highly speculative. Diamond stocks are considered safer than buying direct diamonds but, at the end of the day, it is about the forces of demand and supply. 

Segments of diamond stocks in India

There are different segments to the diamond industry in India. Firstly, there is the broad gems and jewellery segment of which diamond is a part of the jewellery segment. Then there is the business of handling the diamond roughs. Third is the business of cutting and polishing rough diamonds, which is the biggest segment in terms of workers employed. Finally, there is the new emerging segment of laboratory (lab) grown diamonds. Let us look at the performance in the current financial year in each of these segments.

Performance of the Gems & Jeweller sector overall

For the month of February 2023, the overall gross exports of Gems & Jewellery stood at $3,489 million; which roughly translates into Rs28,833 crores for the month. On a yoy basis, the exports in February were up by 12.2% in dollar terms but 23.6% in rupee terms. If you look at month of February 2023, the overall gross imports of Gems & Jewellery stood at $2,239 million, which translates into Rs18,486 crore in rupee terms; which is actually lower by -17.2% in dollar terms and -8.8% in rupee terms.

Let us now turn to the gems and jewellery sector for the 11 months period from April 2022 to February 2023. Overall gross exports of Gems & Jewellery for FY23 stood at $34.86 billion; which is -2.18% lower in dollar terms but 5.27% higher in rupee terms. Regarding the overall imports of Gems & Jewellery, it stood at $23.88 billion for the first 11 months of FY23. This represents a yoy growth of 0.77% in dollar terms and 8.43% in rupee terms.

Performance of the cut and polished diamonds sector

This is the more focused and niche area of gems and jeweller and deals with the core Indian specialization of polishing and cutting roughs so as to make them export worthy and usable in most of the global marquee jewellery collections. 
For the month of February 2023, the overall gross exports of Cut & Polished Diamonds stood at $2,369 million; which roughly translates into Rs19,582 crores for the month in rupee terms. On a yoy basis, the exports in February were up by 19.73% in dollar terms but 31.94% in rupee terms. If you look at month of February 2023, the overall gross imports of Cut & Polished Diamonds stood at $76.44 million, which translates into Rs632 crore in rupee terms; which is actually lower by -33.2% in dollar terms and -26.4% in rupee terms.

Let us now turn to the Cut & Polished Diamonds sector for the 11 months period from April 2022 to February 2023. Overall gross exports of Cut & Polished Diamonds for FY23 stood at $20.44 billion; which is -7.3% lower in dollar terms but just about -0.2% lower in rupee terms.  Imports of Cut & Polished Diamonds for 11 months of FY23 stood at $1.22 billion.

Rough diamonds and lab-grown diamonds

Indian diamond industry has traditional been a major importer of roughs (crude unpolished diamonds) and its total rough imports for FY23 stood at $15.72 billion. There has been an impact of slowdown concerns and this is -7.2% lower in dollar terms and -0.1% lower in rupee terms. If one looks at the volume of rough diamonds imported in the 11 months of FY23, it was 21.8% lower at 1,206.35 lakh carats during as compared to at 1,541.73 lakh carats in the comparable 11 months in the previous year. 

Conclusion: challenges faced by diamond companies in India

The biggest challenge has been the Russia-Ukraine war. The diamond polishing industry sources most of its rough diamonds from Russia. With the current embargo on Russia and the blockade of the Black Sea, it is increasingly becoming difficult for the Indian diamond polishing industry to procure diamonds from Russia. Currently, Alrosa, the Russian diamond mining company, supplies 30% of the world demand for rough diamonds and about 60% of the Indian rough supply. With India accounting for 85% of the global diamond polishing and cutting, it is hurting. That is the focus for now.

FREQUENTLY ASKED QUESTIONS (FAQS)

1. Which Indian Company is investing in  Diamond  Sector?

Several Indian companies are investing in expanding their franchise in the diamond sector and these include Titan, Thangamayil, Kalyan Jewellers as well as unlisted names like Malabar, Joyalukkas etc.

2. What is the future of  Diamond Sector in India?

The outlook is bright since India still accounts for 90% of the diamond polishing in the world. However, currently, they are facing a shortage of roughs due to the ongoing war in Russia, which happens to be the biggest supplier of roughs to India.

3. Who is the largest manufacturer of Diamond in India?

Titan still remains the biggest diamond company in India followed by the other names like Rajesh Exports, Vaibhav Global, Kalyan Jewellers and Asian Star.

4. How can I invest in Diamond  stocks using 5paisa App?

Investors can log into the 5paisa APP either through the internet trading interface or through the 5paisa mobile app and invest in such diamond stocks. Traders need to be registered clients with 5Paisa with an authorized digital interface for placing such orders.