Muthoot Finance, Manappuram Shares Surge Up to 8% Amid Regulatory Relief and Soaring Gold Prices

Shares of Muthoot Finance and Manappuram Finance, India's leading gold loan providers, surged as much as 8% during Thursday's trading. What's driving the surge? A mix of encouraging signals from the government and a significant rise in global gold prices. Investors are feeling upbeat, and it shows. There is growing confidence that the gold loan sector is poised for solid growth in the months ahead.

Govt Steps In, Investors Cheer

Here's what's turning heads: the Finance Ministry has requested the Reserve Bank of India (RBI) to reconsider some proposed gold loan rules. Specifically, it wants loans under ₹2 lakh to be exempt from tighter regulations, at least until January 2026. Why? Because those loans primarily serve rural and lower-income borrowers, strict rules could make it more difficult for them to access quick credit when needed.

These new rules were first proposed in April, following a nearly 30% spike in gold loan portfolios over the previous six months. They aimed to prevent risky lending behaviour. However, industry experts warned that stricter guidelines, such as more stringent collateral checks, could dry up liquidity in small towns and rural areas. Now, with the finance ministry stepping in, investors see a breather ahead, and that's giving share prices a lift.

Gold Prices Hit the Roof

Gold is on fire; spot prices have hit around $2,550 an ounce. Why the jump? Ongoing global tensions, whispers of interest rate cuts from major central banks, and investors looking for a haven. With the U.S. Fed hinting at a softer stance, gold is once again the go-to for anyone nervous about inflation or instability.

For gold loan companies, this is excellent news. When gold is worth more, customers can borrow more against it. That means larger loans, higher margins, and reduced risk for lenders if someone defaults. It's a win all around.

Muthoot and Manappuram Post Strong Numbers

Muthoot Finance's recent results back up the hype. Its Q4 FY25 net profit jumped 22% to ₹1,444 crore. Even more impressive? Its total assets under management (AUM) grew by 37%. That's a strong demand in action. Manappuram isn't far behind either, showing steady asset quality and rising yields.

Why does this matter? Because it shows that the gold loan business isn't just riding a short-term wave. It's growing on solid fundamentals. In India, gold isn't just jewellery; it's a financial lifeline. Therefore, during uncertain times, gold-backed loans remain a sensible option.

Brokerages Are Bullish

Global brokerage Jefferies has just given both Muthoot and Manappuram a thumbs-up with 'Buy' ratings. Their target prices? ₹2,200 for Muthoot and ₹270 for Manappuram, offering more than 20% upside from current levels.

According to Jefferies, both companies are well-positioned to benefit from rising gold prices. They've strong asset quality, high returns, and a business model that has proven effective over time. Additionally, while regulations are still evolving, the overall landscape remains largely supportive.

What It Means for the NBFC Sector

The rally isn't just about two companies; it's lifting the entire non-banking financial company (NBFC) space. Gold loan NBFCs are standing out because they offer short-term, secured loans with relatively low costs. That's hard to beat.

They've also built out huge networks, especially in southern India, where gold ownership runs deep. This gives them an edge over newer fintech firms and traditional banks. Thanks to digital tools, customers can now obtain gold loans through apps, making the entire process faster and easier.

As for banks? Many tried to break into this market but couldn't keep up with the rapid pace of NBFC operations. That's why Muthoot and Manappuram still lead the pack.

What's Next?

The RBI is expected to respond to the Finance Ministry and industry feedback soon, possibly laying out more explicit rules by the end of the third quarter of FY26. If there's a delay or softening of the proposed norms, that'll be seen as good news by the market.

In the meantime, strong gold prices and a steady economy should continue to bode well for gold loan companies. Keep an eye on inflation, interest rates, and global events because they all affect how gold performs.

As of Thursday's close, Muthoot Finance finished up 7.6% at ₹1,960, while Manappuram Finance gained 8.1% to ₹238. Both stocks have crushed the broader Nifty Financial Services index over the past month.

Final Thoughts

Between supportive policy moves and rising gold prices, gold loan companies in India are experiencing a moment of growth. Muthoot and Manappuram, with their substantial numbers and deep reach, are well-positioned to capitalize on this opportunity.

In a country where gold is as much a tradition as it is a treasure, these lenders are likely to remain golden for the foreseeable future.