As gold prices surge to record highs, driven by rising geopolitical tensions, strong demand from central banks, and trade policies, analysts predict positive prospects for gold financiers like Muthoot Finance and Manappuram Finance.
Gold prices have reached unprecedented levels in 2025, with geopolitical uncertainty in the Middle East and US tariff decisions pushing the price of spot gold to an all-time high of $2,938.98 per ounce in international markets. In India, gold futures surpassed Rs 86,000 per 10 grams on the Multi-Commodity Exchange (MCX) last week.
According to analysts, the rise in gold prices presents an opportunity for gold loan companies. “The upward trend in gold prices fosters a favorable environment for growth, particularly in the gold loan segment, which closely correlates with gold price movements,” said Vinod Nair, Head of Research at Geojit Financial Services. A higher gold price generally translates to an increase in the value of gold loans, which benefits gold financers.
Nair expects Muthoot Finance to see strong growth in assets under management (AUM) and asset quality in the medium term, due to the rising gold prices. Muthoot Finance reported a 22% increase in net profit for the December quarter of the current financial year, reaching Rs 1,392 crore, up from Rs 1,145 crore in Q3FY24. Its consolidated loan AUM crossed Rs 1,11,000 crore, with gold loans making up Rs 92,963.6 crore of this total.
However, Nair remains “neutral” on Manappuram Finance due to concerns about the company’s exposure to non-gold segments. Manappuram’s net profit for Q3 dropped by half, falling to Rs 282 crore from Rs 575.31 crore in the same period last year. According to a report by Motilal Oswal, the company’s total AUM was Rs 40,400 crore, with gold loans accounting for Rs 20,800 crore. CLSA has maintained an “Accumulate” rating on Manappuram Finance, with a target price of Rs 2,470 per share, while Motilal Oswal has a “Neutral” rating, raising its target to Rs 2,300 from Rs 2,060.
While rising gold prices benefit gold financers, they present challenges for jewelry stocks. Higher gold prices could lead to reduced jewelry demand and weaker margins. The jewelry sector is also grappling with increased competition and high valuations.
Bloomberg data shows that Titan’s price-to-earnings (P/E) ratio stands at 60.1x, compared to its 5-year historical average of 53.4x. Kalyan Jewellers’ current P/E ratio is 48.9x, above its 2-year average of 43.4x. Recently listed PN Gadgil has a P/E ratio of 25.4x, compared to a 3-month average of 27.2x.
“A prolonged rally in gold prices could lead to margin pressures due to lower volume sales,” said Siddhesh Mehta, Research Analyst at SAMCO Securities. “However, brands with strong inventory management and premium offerings may sustain growth.” Nair of Geojit suggests holding Titan shares, citing high competition, uncertain margins, and a premium valuation.
Despite challenges, some analysts remain positive on certain jewelry stocks. Motilal Oswal maintains a “Buy” rating on PN Gadgil with a target price of Rs 950 per share, while Centrum Broking and Axis Capital continue to back Kalyan Jewellers with target prices of Rs 676 and Rs 575 per share, respectively.
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