Gold financiers stocks were in focus on Friday as rising gold prices and a bullish initiation from JPMorgan lifted investor interest in the sector.
IIFL Finance shares jumped 5.61% to Rs 672.40, after hitting an intraday high of Rs 673.30, up 5.75% from the previous close. Muthoot Finance gained 2.15% to Rs 3,034, while Manappuram Finance rose 2.13% to Rs 356.70. Their respective intraday highs stood at Rs 3,047.50 and Rs 357.50.
At 9:50 am, MCX Gold futures were trading 0.49% higher at Rs 1,60,199, after touching an intraday high of Rs 1,60,630.
Against this backdrop, JPMorgan initiated coverage on three major gold financiers with an Overweight rating, identifying low penetration and structural growth potential in the gold-loan market.
Why Rising Gold Prices Help Gold Financiers
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.
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