Shares of gold financiers Muthoot Finance and Manappuram Finance were in demand on Thursday as gold prices continued to climb, boosting sentiment around lenders that have gold as collateral for their loan portfolios.
Muthoot Finance shares rose as much as 4.83% to Rs 2,997.30, while Manappuram Finance gained up to 3.29% to Rs 351.55 in intraday deals.
At 11:45 am, Muthoot Finance was trading 4% higher at Rs 2,973.60, while Manappuram Finance was up 1.98% at Rs 347.10.
The gains came amid a rise in gold prices. At last check, MCX Gold futures were trading 0.26% higher at Rs 1,58,403, after hitting an intraday high of Rs 1,58,750. The contract's all-time high stands at Rs 1,84,650.
ALSO READ: Aditya Birla Capital To Expand Into Gold Loan Business, Plans 1,000 Branches
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.
ALSO READ: SmallCap Stocks Rally Up To 7.5%; Netweb, Sai Life Lead Gains As Index Nears Record High
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
