The news of income tax (I-T) searches at the jewellery market in Zaveri Bazaar, spread panic and dampened sales in the market ahead of Sunday's gold-buying festival, Dhanteras.

The searches were conducted at 30 cash hawala (illegal channel of transferring money) operators at 45 locations in the city, mostly in Zaveri Bazaar. I-T officials said that Rs5 crore in cash was seized during the searches that began on Thursday and continued on Saturday. Officials said that the searches would continue till Monday.

According to officials, although no gold traders or jewellers had been raided, panic spread in the market as cash that belonged to some bullion dealers were in lockers that had been sealed.

During the search, about 25 lockers were sealed by more than 70 I-T officials and staff, and about 25 other lockers were being scrutinised till late on Saturday.

Officials said that the searches were being conducted following information on large amounts of unaccounted cash being deposited in lockers of hawala operators.

However, owing to the I-T searches on the market and cash of some bullion traders being stuck, the sentiments in the jewellery market in the area took a hit.

"Sales in the jewellery market have already been hit owing to inflation and high gold prices. The news of the searches only added to the gloom," said a jeweller from Zaveri Bazar requesting anonymity.

He added that many bullion dealers and jewellers whose shops and offices were situated around places being searched, brought down their shutters fearing that they would attract I-T officials. The jewellers are, however, hoping for some good business on Sunday.