By Sutanuka Ghosal, ET Bureau | 20 Aug, 2014, 03.00AM
KOLKATA: Demand for silver has plunged as much as 75% in India since the beginning of this fiscal even as prices have fallen almost Rs 4,000 per kg to Rs 43,000 compared to the previous year, a trend that traders blame on the deficient monsoon coupled with a robust equity market.
India imported about 4,000 tonnes of silver last year, spelling average monthly imports of about 330 kg per month, said Prithviraj Kothari, vice president of Indian Bullion &Jewellers Association. But since April this year, monthly imports of silver have averaged just about 70-80 tonnes as demand has eroded sharply. "The worst months have been May, June and July and the trend is still continuing in August as well," said Kothari.
Delayed and below average monsoon has been the major spoilsport for silver, the poor man's gold. During years of good monsoon, farmers start buying silver in small quantities to create an asset for themselves. The major buying takes place during harvesting which coincides with Diwali and the festive season. "Prices are low, yet there are no buyers in the market. I only sell silver rings, but this year there is no demand for this type of small items also," lamented Vijay Soni, owner of Jaipur-based Kalyan Fancy Jewellery Store.
Bullion traders rue that investment demand for silver has almost dried up. "There is a lot of negative sentiment both for gold and silver. Actually investors are moving away from commodities, affecting the offtake of both the precious metals. The industrial demand for silver has also not picked up as the economy is yet to recover fully from the slowdown," said Amit Sampat, director, Pushpak Bullions.
Silver is increasingly used in a variety of devices and applications, from computer chips to solar power generators. But Mukesh Kothari, director of Riddisiddhi Bullions is hopeful that prices of silver will climb to Rs 50,000 kg during the festive season. "Investors should look at silver now as it is a good instrument to park funds," he said.
South India, a major market for silver, largely for use as deities and utensils, has also not seen growth even though prices have fallen. Demand for silver has dropped more sharply than it has in case of gold, said LM Srinivasalu, a Chennaibased silver merchant. "Nowadays people are not keen to keep silver deities in their homes due to safety concern, which is affecting silver demand. There are no major purchases because of speculation that prices will fall further. Exports of silver items too have dwindled. We were exporting tableware to the US and Australia, but demand from these countries has come down," Srinivasalu added.
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