MUMBAI, July 17 (Reuters) - Titan Industries Ltd (TITN.BO) expects jewellery sales to grow by up to a quarter this fiscal as it expects robust demand for its diamond jewellery products as gold prices trend upward, a senior official said.

Tanishq jewellery, a Titan Industries Ltd company

Titan sells jewellery under its premium 'Tanishq' brand and 'Goldplus'- a rural and semi-urban chain. Its jewellery division accounts for more than 60 percent of revenues.

"We have been on track, our targets were lower than our normal growth rates because we recognised 2009/10 is not going to be that easy," C K Venkataraman, chief operating officer of Titan's jewellery division, told Reuters.

Venkataraman said jewellery sales may grow 20 to 25 percent in FY10, helped by higher diamond sales. Titan's jewellery division had reported a revenue of about 30 billion rupees for the year ended March, he added.

"Diamond products are doing well and that may happen also because the gold prices are quite high whereas the diamond customers are not looking at the gold rate so much," he said.

Tanishq sells both diamond and gold jewellery in 120 stores across India.

"Diamond is anyway a continuously increasing category because the penetration of diamonds is low. Only 15 percent of the total jewellery market is diamonds, so the opportunity for growth is quite high."

At 3:54 p.m., August gold futures MAUQ9 were trading 0.16 percent higher at 14,741 rupees per 10 grams, 14.6 percent higher than its contract low.

The amount of gold in studded jewellery varies from 25-30 percent.

Titan, which operates 150 stores under Tanishq and Goldplus, would be opening a few more this year, but was not bullish on expansion.

"We are opening some more stores...but not too many. The emphasis will be on quality rather than quantity," he said without elaborating.

NO BENEFIT FROM EXCISE CUT

Bangalore-based Titan, which occupies about 3.5 percent of India's 800-billion-rupee gold and diamond jewellery market, will not benefit from the excise duty exemption on branded jewellery the government announced in the federal budget as it had stopped paying the duty in 2006, Venkataraman said.

Finance Minister Pranab Mukherjee had announced the government will remove a 2 percent excise duty on branded jewellery.

"Under excise law if the brand trademark is not indelibly marked on the product it is no longer a brand by excise law. We removed our branding in July 2006 and have ever since stopped paying excise duty.

"Therefore, the exemption is economically no longer beneficial to us as neither were we paying excise duty nor were we charging the customers. But it's a welcome thing in any case for the industry," he said.

Shares of Titan Industries closed up 0.49 percent at 1,201.55 rupees in the Mumbai market. (Reporting by Aniruddha Basu; Editing by Sunil Nair)