Diamonds are now investors' best friend

Sharp fall in polished diamond prices may be worrying diamantaires in Surat. But, high net worth individuals are seeing a sparkle in the crashing prices.
Anticipating some correction by Christmas, increasing number of HNIs are looking at diamonds as an alternative to gold as a safe shelter for their money, amid financial uncertainty and economic and currency instability.
Polished diamond prices have fallen by 15%-20% in the last two months.
Most HNIs, according to the industry leaders, have started a rush at the big retail houses to purchase loose diamonds, anticipating the prices in the short-term - before Christmas season - might recover by seven to eight per cent.
Mehul Choksi, chairman and managing director (CMD), Gitanjali Group, said, "The big-sized diamonds above four carats are the big bets these days and they are much sought after by HNI investors. The diamond jewellery market in India is pegged at Rs 25,000 crore annually and it is growing by 25 per cent year-on-year."
Choksi added, "The loose diamond prices in the domestic markets in Surat and Mumbai have crashed for the first time after the 2008 economic crisis. Thus investors see this as an opportunity to park their money in the precious stones. In the short or the long-term, the diamonds would definitely fetch them a very high return."
Kaushik Mehta, a diamond jewellery manufacturer in Mumbai said, "We are seeing lot of interest in loose polished diamonds which are above three carat. Most of our clients buy high-quality diamonds ranging from 3-10 carats, which are very costly. Some prefer to stud the diamonds in jewellery, while many keep it as investment. When the price would appreciate in the long term, they would book the profit."
Mehta said a top quality diamond weighing four carat with D colour is worth Rs 2.5 crore to Rs 3 crore. But the same diamond in the open market is now available for Rs 2.15 to Rs 2.80 crore. However, the investors have a huge price benefit.
India is the world's biggest polished diamond manufacturer, supplying about 90 per cent of the polished diamonds by volume and about 80 per cent by value. In 2011-12, India exported about $27 billion worth of polished diamonds.
"The polished diamond demand in the country is set to double by 2020 from the current $1.3 billion to $3 billion. Though diamonds are studded in the jewellery, but they are also becoming a commodity for investment. It is because there is no risk of price volatility in diamond as compared to gold. The polished diamonds continue to offer steady price appreciation of 5-6 per cent per annum," said Aniruddha Lidbide, a diamond analyst.