Senco Gold, a leading jewelry retailer in India, saw its stock price plunge by as much as 19% on October 29, 2024, before recovering slightly.
The dramatic fall, which coincided with Dhanteras, a key festival for gold buying, raised concerns among investors. While some of the losses were pared later in the trading session, the stock still ended the day down over 8% at ₹1,112.80 per share.
The sharp decline has been attributed to multiple factors, including market rumors, high gold prices, and investor sentiment.
Key Factors Behind the Decline
- Surging Gold Prices Dampen Festive Demand
Traditionally, Dhanteras marks a surge in gold and jewelry sales. However, gold prices in India have remained at elevated levels, with rates in Delhi touching ₹79,940 per 10 grams. The high prices have dampened consumer enthusiasm, leading to lower-than-expected sales for jewelry retailers like Senco Gold. Investors likely reacted to concerns over demand slowdown in the crucial festive period, triggering the sell-off. - Rumors of Income Tax Raids on Senco Gold
Market sentiment was further rattled by unverified social media rumors alleging that the company or its promoters were subject to Income Tax raids. While Senco Gold promptly denied these claims and clarified that no such raids took place, the damage was already done. Panic selling ensued, leading to a steep drop in stock prices before partial recovery later in the day. - Profit-Booking After Strong Q2 Performance
Senco Gold had recently reported a strong Q2FY25 performance, with a 7.5% year-on-year increase in revenue to ₹1,403.89 crore and an impressive 61.8% surge in EBITDA to ₹108.74 crore. However, some investors may have taken the opportunity to book profits, given the stock’s previous strong run-up.
Recovery and Market Outlook
Despite the crash, Senco Gold managed to recover from its intra-day low of ₹981.30. The company’s management has reiterated its robust growth strategy, highlighting a 27% retail growth year-on-year in Q2FY25 and a planned expansion of 18-20 new showrooms in the second half of the fiscal year.
Additionally, Senco Gold has demonstrated resilience in its product mix, with the studded jewelry ratio improving to 11.1% in Q2 from 9.9% in Q1. This shift towards higher-margin products indicates the company’s ability to navigate market fluctuations.
Investor Takeaway
While the sharp drop in Senco Gold’s share price was concerning, the underlying fundamentals of the company remain strong.
The sell-off appears to have been driven more by external factors, including market rumors and high gold prices, rather than any fundamental weakness in the business itself. Investors may see this correction as a buying opportunity, especially if the stock stabilizes in the coming weeks.
The key going forward will be consumer demand during the remaining festive season and how gold prices fluctuate.
If Senco Gold continues to expand its market presence and sustain growth in high-margin product categories, the recent dip may turn out to be a temporary setback rather than a long-term concern.
Also Read