NEW DELHI (Commodity Online): India’s jewellery makers are on an expansion spree now following the rise in demand from buyers as the country is on a high after the impressive growth it registered this year till now.

Following this, anticipating huge demand for jwellery from various quarters, Indian jewellery manufacturers are hunting for new acquisitions and expansion opportunities.

Latest in the list of the hunters is Gitanjali Gems, the country’s largest integrated diamond and jewellery manufacturer and retailer. Gitanjali plans to acquire a leading Italian jewellery house by the end of next month.

The company is looking to acquire 100 per equity in a leading Italian jewellery house, which has presence across Europe and Arabian markets. Talks are in an advanced stage and the final decision will be taken by the end of next month.

Gitanjali Gems runs over 130 retail jewellery shops in the US and 2,500 sales points in India. The Italian brand acquisition will help it to penetrate global markets and introduce new jewellery designs with light weight, especially in European and the Middle East markets, where it had earlier failed to gain foothold.

If the deal materialises, this would be third mega acquisition by Gitanjali Gems. It had acquired after Samuels Jewelers and Rogers, both US-based, in 2007.

The Italian group, highly regarded for its wealth of knowledge in the contemporary luxury sector, has over 600 stockists across 30 countries.

Meanwhile, investors in jewellery, works of art, and real estate stand to benefit from the proposed Direct Taxes Code which classifies gains on the sales of these assets as long-term if they are sold after the investor has held them for at least a year.

Under the existing Income-tax Act, which the code will supplant all assets other than equity shares and mutual fund units, need to be held for at least 36 months to be classified long-term.

This move will help Indians to buy more jewellery in the coming years. After this, Gold investment demand in India may rise 25-30 per cent in the second half of 2010 from a year ago.

Indians traditionally buy gold jewellery, which is the most common gift during religious events and an essential wedding present, but buyers are also becoming increasingly aware of the benefits of holding gold in other forms.

Currently, jewellery accounts for 70-80 per cent of the country’s gold demand. Investors, facing inflation, volatile equities and low bank deposit rates in the world’s biggest buyer of the precious metal, may raise the share of gold in their investment portfolio to 20-25 per cent in two years from the current 10 per cent.

Country’s gold demand, which fell to the lowest since 1997 last year because of a drought, would increase and help imports to rise to 600-625 tonnes this year from 480 tonnes in 2009.

In recent years, Indians have increasingly bought gold bars and coins across bank counters and at jewellery shops, purely as an investment.

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