Gold stocks fell further after Modi said Indians should not buy gold unless it is absolutely needed. The comments, which were part of an all-out push for self-reliance and domestic products, sent a chill through financial markets.
On Instagram, PM Modi called on citizens to adopt the “Swadeshi” and “Vocal for Local” principles while urging people to use their money and spend wisely to support India’s domestic economy.
Among his pleas were that gold purchases be limited unless there is a true need.
PM Modi Urges Caution on Gold Purchases
PM Modi said Indians should not buy gold unless necessary as part of a larger message that promotes greater economic self-reliance.
He also suggested citizens reconsider spending on foreign travel purely for leisure and suggested that weddings should go on in India rather than overseas destinations.
The message was based on the domestic economy and that Indian businesses or products should be supported by Indians.
The Prime Minister said the country should embrace the mantra of “Swadeshi” and “Vocal for Local”, linking greater self-reliance with India’s long-term development ambitions.
Why Gold Stocks Reacted
Gold and jewellery firms are also susceptible to changes in consumer demand for the precious metal. In India, jewellery purchases constitute a large share of the physical gold consumption that is done for weddings, festivals and other occasions.
A continuing decline in gold purchases could affect the businesses that are very much associated with jewellery sales and gold consumption.
This is why the Prime Minister's comments attracted interest from investors in gold and jewellery stocks.
But a single statement does not necessarily translate into an immediate or sustained change in India's overall gold demand. Consumer preferences, gold prices, wedding-season demand, investment behaviour and broader economic conditions can all influence purchases.
Swadeshi Push Takes Centre Stage
The comments about gold were part of a larger message from PM Modi to the Indian people to support domestic economic activity.
He urged citizens not to travel abroad just for leisure and called for the idea of “Weddings in India.” The underlying message was that spending within the country could help support Indian businesses, service providers and employment.
The Prime Minister also linked the broader Swadeshi push with India’s goal of becoming a developed nation.
He said that more emphasis on self-reliance would help India move closer to the vision of Viksit Bharat by the time the country marks 100 years of independence.
Impact on Gold and Jewellery Businesses
India is one of the major consumers of gold, and jewellery accounts for a significant portion of physical demand in the world. An effect of any change in consumer behaviour will mean that all gold retailers, manufacturers, and other gold businesses are affected by a change in consumer behavior.
In terms of jewellery sales, margins, gold prices, store expansion, wedding-season demand and consumer sentiment, investors will continue to track as listed companies will do.
So the effects of PM Modi’s remarks will directly depend on whether they will lead to a real and sustained change in gold-buying behaviour.
Investors are still focused on Fundamentals
In the short term, however, the initial market reaction can be significant, so investors need to look at longer-term business fundamentals on the company before coming to any conclusions on the company’s prospects.
Gold and jewellery stocks have to be influenced by different things besides domestic consumption. International gold prices, currency movements, import policies, interest rates and global economic conditions can also play a part.
So the fall in gold-related stocks after the Prime Minister’s remarks does not necessarily mean a long-term weakness in the entire sector.
For now, the comments have brought much more attention to India’s gold consumption and the government’s growing emphasis on domestic production, local spending and economic self-reliance.
The next few months will show whether consumer demand for gold changes meaningfully and whether that change has a lasting impact on gold and jewellery companies listed on Indian stock exchanges.
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