For Indians, jewellery is very precious. Diamonds are hence often considered a status symbol and a thing of luxury. So what makes this glittering beauty a source of conspicuous consumption?
It normally takes 1 billion to 3.3 billion years (25 per cent to 75 per cent of the age of the Earth) to form a diamond. So if you gift a diamond, you are gifting something which has taken Mother Earth more than 1 billion years to make and this gift will remain as your legacy for generations.
Unlike other commodities, diamond is one of the best alternatives for investors, which would help in portfolio diversification as well as wealth creation. Diamond prices are likely to witness a positive momentum and beat inflation in the long run.
The global supply of rough diamonds is expected to grow at a CAGR of 3 per cent and at a slower pace thereafter due to scant supply and complex mining activity. However, demand for diamond jewelry is expected to grow at a CAGR of 4 per cent for the next five years and gradually increase in 2022. Slower supply increase compared to demand would result in a supply shortage in the coming decades.
Now, buying and owning diamond has become more simple, smooth and secure through exchange traded derivative product at Indian Commodity Exchange (ICEX). ICEX has launched first of its kind in global commodity derivatives market the diamond futures in three size variants i.e., 1 Carat, 0.5 Carat and 0.3 Carat. The investor can accumulate diamonds of desired quantity available on exchange and take delivery of the same upon accumulation. Being a regulated market place under Sebi, ICEX is the first derivative exchange to trade on certified diamonds. ICEX makes it suitable for even small investors to buy in small lots at staggered investments.
However, while trading in diamond, keep in mind the following points:
- Expiry date of the diamond 1 CT (May Futures) is on May 5. In general, expiry date is on fifth of every month. Incase fifth is a holiday, the preceding trading day will be the expiry date of the diamond futures contract
- Staggered period will commence from 1st of every month of expiry and the investor needs to pay the delivery margin for the open positions
- After expiry, the diamond will be delivered to the investors EDCM account of ICEX in the form of electronic diamonds
- The investor can convert electronic diamonds to physical diamonds at expiry
- You will get Electronic Debit & Credit Module (EDCM) login credentials to check diamond holdings in your account
- Diamond delivery takes place in Surat and delivery to other cities will be done with additional cost towards courier and insurance charges
The author is deputy general manager, Karvy Comtrade Limited