Is there a bubble building in South Indian jewellery market? The last few months with volatile gold prices saw the jewellery markets buzzing and in small towns of South India; Diamonds, which had never been part of the equation earlier, are the unexpected winners.

The diamond jewellers are building up consumer confidence. There are massive ad campaigns to convince people that there are diamonds to suit every budget. The mega publicity of the Akshaya Thrithiya, the third day of the new moon of Vaishakh month (April-May), saw sales that rival the sales on the Karva Chauth day in the North. %% No big deal, you say. But this is a recent trend. There were marginal sale increase every year for this event, which is considered one of the four most auspicious days of the Vedic Calendar for the South Indians - the ‘Akshaya’ standing for limitless, thereby limitless prosperity. So in Southern India, especially in traditional Tamil Nadu, gold coins and diamond jewellery were bought and worn on this day to usher in a prosperous year. %% This year, however, saw the day adopted in Kerala, a state not known to be swayed by sentiments. Rising income, celeb endorsement and a slickly packaged marketing strategy saw the unprecedented effect of customers elbowing for space in showrooms. %% A better example to showcase the trend would be to point out that the Joy Alukkas Group, winner of the Best Retailer of the Year in Middle-East in 2005 with over 61 outlets throughout Asia opened its first shop in Kochi three years back. Now they have 11 outlets and all of the network with exclusive diamond sections. The company adopts big sales incentives, personal targets for salesmen and even some freebie diamond baubles for the big splurgers. %%{{ Aggressive Marketing :}}

Till recently, diamonds were the upper middle class wear. The preference was for the solitaires of Vvs1 grade with high clarity and for the clear stone that projects better aura. The pieces were thick solid rings or one classic pair of earrings. But now its sub-scale – the stones are matched with white gold and platinum with minimal designs and chic, contemporary look is in. Popular are the baguettes, marquis and classic white diamonds as also, the colored diamonds. %% According to Srinath, South India Marketing in-charge of the Diamond Trading Company, the growth in the share of diamond jewellery in the southern markets of India has been possible due to successful and clear communication strategy. The company takes into consideration the vagaries of the immensely diverse Indian market and addresses each segment independently. %% In the south, cities like Kochi are recording phenomenal growth. The twin cities of Hyderabad and Secunderabad have also registered growth as large as 35% this year. %%{{ The Kerala Revival:}}$$ Tradition is a powerful emotive in the south. But the interests in Kerala are quite different. %% In Kerala, the interest in gold is never speculative, rather it is driven by underlying demand. The emphasis on gold in daily wear and weddings has ensured that gold is never out of fashion here. As the prices peaked this year, jewellers in Kerala speculated that there would be a movement in the reverse order. But inspite of the anxiety, the positive trend held strong. However a resultant fallout is seen in the following sectors- {[ Diamond retailers have found a strong foothold here. ][ There is even a budding business community that is trading in precious gemstones. ][ Diamond traders have formed consortiums in this southern Indian state, to try and entice diamond workers back from other places like Surat. ][ Diamond designers are hot property.]}%% This business has been so good, that it has percolated down to the craftsmen and there is a revival of the industry within the state.

Some purists may view the sales in diamonds inversely proportional to the sales in gold jewellery, but the actual figures also prove that clients are getting more discerning these days.

{{The Diamond Advance:}}$$ As Jose Pullikunnan, Senior Manager of the Jewellery Division of Joy Alukkas puts it, it is symbolic of the opening up of Kerala to western influences. Diamond is slowly replacing even the traditional pieces used for important occasions like a ring-exchange ceremony. The company claims they had sales worth Rs 18 crore in 2005 which have gone up to Rs 26 crore lately.

Our USP is our experience in the Gulf, Jose said. We bring with us experience in what the sophisticated clientele wants and it shows in our display and our range. %% Interestingly, Kerala is a paradox in many ways. The workers exodus to the Gulf region has atleast one member of many households working in the Gulf and the pure gold that the NRIs bring is a commodity to be coveted. The traditional Malayalee bride preens under the status wear of kilos of the same metal. %% But the design element was never really explored inspite of the various international influences. Women in the state opted for traditional designs like kasi malai, until recently and jewellery design was left to individual goldsmiths operating from home, crafting each one with perfect care and attention to detail, but taking months in the process. %% However, with the surge in sale of diamonds, it’s a different story. K.V. Johnny, who runs a design unit at Trishur and been in this business for 31 years notes thus. “The {{Malayalee preferences are contrary to the trends outside Kerala. He wants designs where the diamond is prominent and the gold minimal}}. While the Italian patterns are famous in North India, we make lightweight jewellery with clean-cut designs that are easy to wear and can be worn everyday.”

There is also a gemmology fascination. Johnny’s unit Super Stone Enterprises markets ornaments under the name of JWALA. His is one of the bigger suppliers of navaratna pieces made of different precious stones to neutralize bad influences. We sell as much as 300 pieces a day, he said. So far, ornaments with precious and semi-precious gemstones move very slowly in the market. But jewellers have found that it is easier to re-sale if the precious stones are clubbed with diamonds. Intricate designs involving gemstones have boosted the sales of many outlets. %% The real issue, it seems, is not whether diamonds are forever, but whether there will be enough diamonds of the genuine variety to cater to the increasing demand. %%{{ Buy-Back Guarantee Clicks :}}$$ Almost all shops in the city also offer the money-back guarantee, which is an assurance to the new buyer. “The price of diamonds has never gone down. Every year, it is going up by 6 to 10 per cent. That is the reason why the dealer gives a `money-back’ offer, a guarantee to take back the diamonds sold from his showroom at the price at which sold earlier if the market price falls below,’’ says Sibi, the marketing manager of Josco Jewellers. Every wedding party now opts for a diamond set and for parents saving up for the wedding of daughters, this is the best option, he adds. As investors flocked to equities, and the fluctuating price of the yellow stuff of fashion gives the heebie-jeebies, diamond jewellery is now being recognized as a safe and clever investment option.

{{A Win-Win Situation !}}$$ Studies as late as 2004 show that gold smuggling so rampant in the eighties in Kerala is as bad as before. Gold is still the primary smuggled-in commodity of the state.

In 1991, the import of gold was liberalised by permitting passengers to bring in five kg of gold each on payment of duty in foreign exchange. In 1996, it was further liberalised by permitting import of 10 kg of gold subjected to certain lax conditions. These measures were touted to change the composition of the smuggled goods, changing focus to narcotics, weapons and electronics. But contrary to official statistics, the demand for gold and its smuggling began to rise again in 1996 despite the low price margin brought about by the dollar inflation. %% The economic mandarins hope that development of a more robust market for the yellow metal can kill the residual hawala that might be taking place through gold smuggling because of the marginal premium commanded by the metal in the domestic market, caused at present by restrictive imports. A thriving gold deposit market in the future is supposed to help monetise large amounts of gold lying with households. %% But either way, it is the diamond industry that wins. Increase in jewellery consumption per se means more sales and a look at alternatives also means diamonds, notes a jeweller. %%{{ Diamond Demand Rising :}}$$ India is the world’s largest consumer of gold for jewellery. The estimated Indian diamond jewellery market is already worth Rs. 7,800 crore, with a growth of 19% this year. Retail outlets selling diamond jewellery have multiplied 6 times and retail investment has increased 10 fold.

The last few years, DTC reported an uptick in rough diamond sales helped by strong retail demand. According to DTC figures, the diamond jewellery acquisition growth is 55% and average stock had doubled from 11% to 23%. %% The inborn caution among South Indians has left them cautious of investing in the diamond market. But there is still a lot of money swirling around, held by both wealthy individuals and institutional investors. The jewellery industry remains hassled by issues like uniform VAT bill and fluctuating gold prices and speculative buying of diamonds is curtailed by the fact that the market is difficult to fathom for most investors - there are many different qualities of diamond, and regulation has been haphazard in the past. %% But the boom in economy at small towns and the latest legitimacy to precious gemstones can result in the unthinkable. The latest fall in the stock market will also prompt some to park their investment in secure places and other commodities have always performed well at a time, when the share market is in doldrums.