ICICI Prudential Asset Management Company (AMC) remains optimistic about silver's long-term prospects, despite recent price corrections. The company cites the metal's dual role as an inflation hedge and industrial commodity as key factors supporting its positive outlook.

Silver's Performance and Industrial Demand

Chintan Haria, Principal – Investment Strategy at ICICI Prudential AMC, highlighted silver's impressive performance:

• Approximately 30% compounded annual growth over the past three years
• Outperformed inflation in four of the past six years

The fund house notes expanding industrial demand for silver from various sectors:

• Electric vehicles
• Renewable energy
• 5G telecommunications
• Biopharma
• Medical technology

Market Dynamics and Supply-Demand Balance

Recent market movements and supply-demand dynamics have caught the attention of investors:

According to The Silver Institute, global demand may exceed supply in the coming years, potentially supporting prices.

ICICI Prudential AMC's Actions and Recommendations

In response to market conditions, ICICI Prudential AMC has taken the following steps:

1. Reopened its Silver ETF Fund of Fund after a temporary suspension
2. Views the recent correction as a reasonable market adjustment

For retail investors, Haria recommends:

• 5-10% portfolio exposure to silver
• Invest through Silver ETFs or Fund of Funds
• Utilize systematic investment plans to manage volatility

Outlook

Despite the recent price correction, ICICI Prudential AMC maintains a positive long-term outlook on silver. The company believes that the metal's dual role as an inflation hedge and industrial commodity, coupled with increasing demand from various sectors, may continue to support its value in the coming years.

Investors are advised to consider silver as part of a diversified portfolio, keeping in mind its potential for volatility and the importance of a systematic investment approach.

In a move that has brought relief to the silver jewellery export sector, the Directorate General of Foreign Trade (DGFT) has clarified the import rules for silver jewellery. This clarification has removed market uncertainty and is expected to have a positive impact on the precious metals market.

Key Highlights

• DGFT clarification maintains exemptions for SEZs, export-oriented units, and DFIA license holders
• Market uncertainty resolved, eliminating premiums of ₹20,000-₹25,000 per kg before Diwali
• Silver prices reached a global high of $54.47 per ounce in September
• Current MCX silver price: Near ₹1,45,000 per kg
• Projected silver consolidation: Around ₹1.50 lakh per kg by end-2025
• Gold expected to consolidate around ₹1,25,000 per 10 grams by end-2025

Import Rule Clarification

The DGFT's clarification on silver jewellery import rules has been welcomed by the industry. The move allows continued exemptions for Special Economic Zones (SEZs), export-oriented units, and Duty Free Import Authorisation (DFIA) license holders. This decision aims to prevent misuse by non-compliant operators while supporting legitimate exporters.

Market Impact

The clarification has had an immediate effect on the market, removing uncertainty that had previously created significant premiums:

Bullish Outlook for Precious Metals

The silver market has shown strong fundamentals, with several factors contributing to its positive outlook:

1. Supply deficit for five consecutive years
2. Strong ETF demand
3. Increased central bank buying

Analysts project that silver prices may consolidate around ₹1.50 lakh per kg by the end of 2025.

Gold Projections

Gold, another key precious metal, is also expected to perform well:

• Projected consolidation: Around ₹1,25,000 per 10 grams by end-2025
• Driving factors:
  • Safe-haven demand
  • Anticipated Federal Reserve rate cuts

Export Boost

The clarification on import rules is timely, coinciding with the festive and wedding season. This is expected to provide a significant boost to silver jewellery exports, supporting the industry during a crucial period of demand.

Conclusion

The government's clarification on silver jewellery import rules, coupled with strong market fundamentals and positive projections for precious metals, paints a promising picture for the silver market. Exporters and investors alike will be watching closely as these developments unfold in the coming months.