Muthoot, CSB, other gold financiers rise up to 5% as bullion hit 2-mth high

Shares of gold financiers gained in Thursday’s trade as international gold prices witnessed a strong surge supported by lower US bond yields and a weaker dollar following a surprise US Treasury liquidity-support announcement. Among the stocks, Muthoot Finance, Manappuram Finance, IIFL Finance and CSB Bank were in focus.

As of Thursday’s session, Muthoot Finance was up 4.7 per cent intraday to ₹2,997.80, while Manappuram Finance gained 3.2 per cent to ₹351. IIFL Finance rose 3 per cent to ₹649 apiece, whereas CSB Bank moved the most, gaining 5.09 per cent. 

International spot gold climbed to $4,526 an ounce, its highest level since June 2, as the US Treasury’s liquidity-support announcement pushed bond yields and the dollar lower. The decline in yields has also improved the appeal of non-yielding assets such as gold.

Why gold prices matter for financiers

Higher gold prices can support gold-financing companies by increasing the value of jewellery pledged as collateral. Since gold loans are typically sanctioned based on the per-gram value of the metal, a rise in prices means borrowers can potentially raise the same amount of money by pledging a smaller quantity of gold.

This can improve collateral coverage and support demand for gold loans, particularly when consumers seek liquidity against their jewellery. For lenders with significant exposure to the gold-loan segment, sustained strength in bullion prices could therefore provide support to loan growth and the value of pledged collateral.

Sunny Agrawal, head of fundamental research at SBI Securities, noted that gold lenders have been in focus amid the sharp rise in gold prices, further supported by the cooling-off in bond yields. However, intensifying competition from both existing players and new entrants, including Tata Capital and Aditya Birla Capital, is likely to put pressure on margins in the gold loan segment. New entrants may also adopt higher LTVs as a strategy to attract customers, potentially increasing competitive intensity further.

“We have already seen signs of this pressure, with Muthoot Finance reporting a meaningful margin compression in Q1FY27 due to these factors. Given the increasing competitive intensity and the potential for further margin pressure, we remain cautious on the gold lending segment,” he added. 
Vipin Kumar, AVP research at Globe Capital Market noted that the technical chart structures of the leading players, Muthoot Finance, Manappuram Finance, and IIFL Finance remain strong and constructive. The overall trend remains positive, with Manappuram Finance and IIFL Finance holding above their key short- and long-term moving averages and exhibiting favourable price structures. Muthoot Finance has already witnessed decent profit-taking from its all-time high and is now heading towards its key price-support zones. Hence, “we suggest traders maintain a buy-on-dips approach in these stocks for short- to medium-term accumulation,” he added. 

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