Muthoot Finance, Manappuram shares rally on spike in gold prices

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₹66,778 per 10 grams. In the international market, spot gold prices rose above $2,200 per ounce levels. Gold loan companies like Muthoot Finance and Manappuram Finance tend to benefit from the increase in gold prices as the value of the collateral held by these companies rises.

This can lead to an increase in the ticket size of loans. Read here: Gold rate today hits new peak of ₹66,778 after US Fed meeting. Should you buy in current gold price rally? Moreover, the loan-to-value ratio (LTV), which represents the ratio of the loan amount to the value of the collateral (in this case, gold), tends to increase with rising gold prices, allowing borrowers to access a higher percentage of the value of their gold as a loan, leading to loan growth for gold financiers.

Muthoot Finance and Manappuram Finance have also been beneficiaries of stable yields and growth in Assets Under Management (AUM). This is expected to receive a further boost from the upward movement in gold prices and weaker growth in the unsecured loan segment, analysts said. Also Read: Nalco, Hindalco, Vedanta share price rise 2-6%. Should you Buy , Sell or Hold the stocks? These companies have witnessed a notable positive quarter-on-quarter (QoQ) growth in gold loan AUM in the last three quarters.

Moreover, Muthoot Finance and Manappuram Finance have maintained their FY24 guidance for substantial gold AUM growth of 15% and 10%. Analysts believe the ascent in gold prices further acts as a tailwind. Recently, ICICI Securities upgraded its rating on Muthoot Finance to ‘Buy’ from ‘Add’ earlier with a target price of ₹1,605 per share.