Titan started correcting after the Union Budget announced a hike in the customs duty on imported gold from 10% to 12.5%. This comes on the top of the fact that gold prices have also gone up by nearly 25% in the last one year. Normally, in India the demand for gold goes down when the price goes up too sharply. Now with the rise in price of gold combined with the higher import duties on gold, the markets are worried that the demand for jewellery may go down and the profits and sales growth of Titan may be hit. Titan still gets the largest chunk of its revenues from jewellery sales and only a small part of its sales from watches and eyewear.

Apart from the above reason, which was the main reason for the fall in Titan price, there were other reasons also at play. I have just summarized some key reasons why Titan prices have fallen.

· The Indian corporate sector was expecting a cut in tax rate from 30% to 25%. With the budget restricting this benefit only for companies with annual sales of up to Rs.400 crore, Titan is obviously not in this list. This has led to some disappointment.

· The rules pertaining to buyback and increase in public shareholding have also not gone down well with the stock. Now buybacks will be taxed at 20% just like dividends and that has disappointed markets.

· Lastly, there is a slowdown in consumption and that is evident from the warnings given by many consumer goods companies. When you combine this slow growth with the fact that Titan quotes at a P/E of over 80X, there was a clear case for correction.

Even sentimentally, the stock got hit because many large brokerage houses downgrade the stock from a Buy call to a sell call or a neutral call.