Gold Financiers shares rallied for another day with Muthoot Finance Ltd. and Manappuram Finance Ltd. jumping up to 5% in trade on the NSE.
Shares continued to trade near day's high, up over 5% to Rs 3,177.80 as of 11:58 a.m on Monday, compared to a 0.23% decline in the Nifty index.
Muthoot Finance jumped 5.26% to Rs 3,181 apiece, while Manappuram was reached an intraday high at Rs 369.90 after climbing 3.5%.
Later it pared gains to trade 2.2% higher at Rs 354.50 apiece. The second day of surge comes in the backdrop of rising gold prices.
Gold prices in Indian on the Multi Commodity Exchange (MCX) traded higher on Monday, following gains in international bullion prices, amid a weak US dollar.
MCX gold rate for October futures contracts traded higher by Rs 908, or 0.56%, at Rs 1,63,346 per 10 grams.
In the global markets, gold prices hit their highest levels in more than three months. Investors now await key US inflation data and a speech later this week by Federal Reserve Chair Kevin Warsh.
Spot gold price rose 0.73% to $4,636.82 per ounce, after hitting its highest level since May 15 earlier in the session. Last week, gold prices rallied more than 5% last week. US gold futures rose 0.27% to $4,693.11 an ounce.
A sustained rise in gold prices can be positive for gold financiers as it increases the value of the collateral pledged against loans, providing greater security to lenders and potentially supporting loan growth.
Higher gold prices can also allow borrowers to raise more funds against the same quantity of gold, subject to regulatory loan-to-value limits. This can support disbursements and gold-loan AUM growth for lenders such as Muthoot Finance and Manappuram Finance.
At the same time, stronger collateral values can provide a cushion against credit losses, although the eventual benefit to earnings will also depend on loan growth, yields, funding costs and asset quality.
Shares of Muthoot Finance have fallen 16.6% year-to-date, and 18.57% in the last 12 months. On the other hand, Manappuram's stock has risen 18.6% year-to-date and 37.2% in the last year.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
