Muthoot Finance, Manappuram Finance: Gold finance companies fall by over 4.5% as gold prices decline sharply

In the domestic market, precious metal prices recorded sharp losses last week.

On the Multi Commodity Exchange (MCX), silver plunged by ₹32,663, or 12.59%, to settle at ₹2.26 lakh per kilogram, while gold declined by ₹13,974, or 8.82%, to close at ₹1.44 lakh per 10 grams.

The sell-off intensified mid-week after policy signals from major central banks—including the Federal Reserve, Bank of Japan, Bank of England, and European Central Bank—highlighted concerns over rising crude oil prices and persistent inflation, indicating that monetary easing may not be imminent.

In international markets, precious metals also witnessed significant declines. Silver futures on Comex fell by $11.68, or 14.36%, to $69.66 per ounce, while gold dropped by $486.8, or 9.6%, to $4,574.9 per ounce over the past week.

Analysts note that a strong US dollar—hovering around the 99–100 range—and elevated interest rates continue to weigh on gold’s recovery.

Other key points

The Federal Reserve’s pushback against rate-cut expectations, coupled with rising energy costs complicating inflation control, has prompted financial markets to push back expectations of monetary easing to 2026, thereby reducing the appeal of gold as a safe-haven asset, experts said.

However, they noted that global central banks are unlikely to change their long-term gold accumulation strategies, indicating that structural demand for the metal remains intact.

Geopolitical developments have offered limited support to prices, although gold continues to function as a safe-haven asset, providing a cushion against downside risks.

In the domestic market, seasonal demand driven by the upcoming wedding season and festivals such as Akshaya Tritiya may offer near-term support to prices.

Why is the sharp fall in gold prices negative for gold financiers?

A sharp fall in gold prices is negative for gold finance companies like Muthoot Finance and Manappuram Finance because their loans are backed by gold collateral; when prices drop, the value of that collateral declines, increasing the risk of loan-to-value (LTV) breaches and forcing lenders to seek additional margin or liquidate pledged gold.

This can lead to higher defaults, pressure on asset quality, and potential losses if auctions fetch lower-than-expected values.

Loan-to-Value (LTV) is a simple ratio that tells you how much loan you get compared to the value of what you’re pledging (like gold, a house, etc.).

How stocks are performing in early trade

Shares of Muthoot Finance dropped as much as 4.69% to ₹3,160.20 apiece on the NSE, while Manappuram Finance shares declined by up to 3.76%.