Muthoot Finance share price hits record high, rallies 25% in eight sessions. Should you buy or sell?
Muthoot Finance share price rallied over a percent on Tuesday, extending gains for the eight consecutive session amid sustained buying momentum. Muthoot Finance shares rose as much as 1.20% to a record high of ₹ 2,570.65 apiece on the BSE.
The gold loan financier, Muthoot Finance stock price has surged 24.6% in the past eight sessions, with its market capitalization crossing the ₹ 1 lakh crore-mark.
The recent rally in shares of major gold NBFC stocks, including Muthoot Finance shares, Manappuram Finance and IIFL Finance shares, escalated after the Reserve Bank of India (RBI) eased rules for small-ticket gold loans.
On Friday, the RBI issued its final guidelines on gold loans, which include more relaxed Loan-to-Value (LTV) norms compared to the draft proposals. Under the revised norms, the central bank raised the LTV ratio limit for gold loans below ₹ 2.5 lakh to 85% from 75%. Loans above ₹ 5 lakh will continue to have a 75% LTV cap, including interest.
The LTV indicates the percent of value that a borrower can receive for their gold.
According to analysts, the final guidelines are more balanced and provide much-needed flexibility to gold financiers. Unlike the draft circular, the final rules do not mandate provisioning in case of an LTV breach. Instead, the only requirement is that lenders must outline the actions to be taken in such cases within their credit policy.
'The RBI is enforcing stricter renewal rules—borrowers must repay interest and meet credit checks before renewal or top-up. Lenders now need to clearly disclose all charges, including gold assaying and auction fees, in loan documents. This is a significant step toward greater prudence, transparency, and borrower protection, benefiting all NBFCs, particularly gold loan providers,' said Avinash Singh, Senior Research Analyst at Emkay Global Financial Services Ltd.
In FY25, Muthoot Finance reported a consolidated loan AUM (asset under management) of ₹ 1.22 lakh crore, having crossed ₹ 1 lakh crore in Gold Loan AUM, and achieved a consolidated net profit of ₹ 5,352 crore.
Muthoot Finance share price has broken out of a bullish 17-week-long flat base at ₹ 2,300 with strong price action supported by institutional-grade accumulative volumes, noted Anshul Jain, Head of Research at Lakshmishree Investments.
'The structure indicates strength, and Muthoot Finance stock price is now poised to move towards Fibonacci extension targets of ₹ 2,690 and ₹ 2,850. The breakout zone will now act as strong support, and as long as price holds above ₹ 2,300, dips can be considered as buying opportunities for positional traders,' said Jain.
At 10:15 AM, Muthoot Finance share price was trading 0.79% higher at ₹ 2,560.00 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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