Shares of gold loan providers slide sharply as Budget 2024 cuts custom duty on bullion

Muthoot Finance settled the day's trade at ₹1,733.95 apiece on the National Stock Exchange (NSE), down 4.31% as against the previous session's close.

Manappuram Finance faced a sharper decline, as its shares last traded at ₹202.73 apiece on the NSE, down by 5.83%.

What pushed the gold loan providers in the red?

Stocks of both the lending entities plunged in the afternoon trading, after Finance Minister Nirmala Sitharaman stated in her Budget speech that the basic customs duty (BCD) on gold was being slashed to 6% from 10%.

“To enhance domestic value addition in gold and precious metal jewellery in the country, I propose to reduce BCD on gold and silver to 6% and that on platinum to 6.4%,” Sitharaman said.

The Budget document that was released later explained that the move is aimed at boosting domestic manufacturing of jewellery, correcting inverted duty structure, deepening value addition and promoting export competitiveness.

Sharing further details, the document noted that the customs duty on the gold bar is being cut to 6% from 15%; and on gold dore, it is being reduced to 5.35% from 14.35%.

Notably, the reduction in customs duty on gold is expected to bring down the price of the precious metal in the near term. This is seen as the reason behind the decline in shares of the gold loan issuers, analysts said.