Manappuram Finance and Muthoot Finance Stocks Surge as Gold Hits Record Highs

21 Mar 2024 , 02:22 PM

Manappuram Finance and Muthoot Finance stocks surged on Thursday, with gains of over 3% and 5% respectively, driven by record-high spot gold prices reaching ₹2,220 per ounce.

Spot gold prices witnessed a 3% increase over the week and a remarkable 10% surge over the past month, largely influenced by the US Federal Reserve’s decision to maintain its easing stance of three rate cuts in 2024.

Traders are now speculating a 73% probability of a rate cut by the Fed in June, further bolstering gold prices amidst safe-haven demand and global geopolitical tensions.

Notably, central banks of China, Poland, Singapore, and Libya have emerged as prominent buyers of gold, contributing to the upward pressure on prices.

Strong retail gold buying activity is observed in key markets like China and Turkey, accentuating the upward trend in gold prices.

Muthoot Finance and Manappuram Finance specialize in providing loans against gold, with Muthoot Finance reporting a significant 22% year-on-year increase in Gold Loan Assets Under Management (AUM) in the December quarter, amounting to ₹12,397 Crore.

The surge in gold prices typically prompts individuals to pledge more gold as collateral for loans, resulting in higher loan amounts, benefiting both borrowers and lenders.

Historically, there exists a strong correlation between gold prices and the balance sheet growth of gold financiers, with rising gold prices leading to increased loan growth for these institutions.

Manappuram Finance shares are trading at ₹171.70, marking a 3.18% increase, while Muthoot Finance stock is up 3.12% at ₹1,406.40, at the time of writing.

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