Why lenders are rallying
Gold has surged 32 per cent in dollar terms this year, surpassing its inflation-adjusted 1980 peak. A weaker US dollar, central bank reserve diversification, and expectations of Federal Reserve rate cuts have fuelled the rally. In India, the rupee’s fall below 88 to the dollar, alongside festive season optimism and recent GST cuts, has amplified the momentum.
For gold-loan financiers, the effect is direct. “Rising gold prices favour gold loan NBFCs by increasing the collateral value, reducing risks, enabling higher loan disbursals, and potentially expanding AUM growth,” said Nitin Jain, senior research analyst at Bonanza.
Anirudh Garg, partner and fund manager at INVasset PMS, echoed this: “Gold-loan NBFCs Manappuram Finance and Muthoot Finance have emerged as key beneficiaries of the record surge in bullion prices. Higher gold rates directly lift collateral values, enabling larger ticket sizes and reducing default risks, which in turn boosts AUM growth.”
Manappuram has gained extra attention with reports of a Rs 43.85 billion strategic investment by Bain Capital, while Muthoot is considering raising its growth guidance to above 20% after 40% AUM expansion last year.
Capri Global is also seen as a beneficiary. “As gold prices surge, customers also come up for top up loans to their existing pledged gold,” said Choice Institutional Equities. The brokerage said that it anticipates that a rising price of gold will help in increasing LTVs and boost credit growth.
“We thus believe that a rising gold rate scenario bodes well for gold loan companies like capri global,” said Choice Institutional Equities.
Why jewellers are lagging
The same rally has weighed on jewellery demand. “Record high gold prices have curbed jewellery demand. Consumers are shifting towards lighter, lower-karat, and studded jewellery to manage costs, supporting margins but not volume growth,” Jain noted.
Titan has managed to offset some of the pressure. “Despite record-high bullion prices softening consumer sentiment, Titan delivered a strong Q1FY26, with jewellery revenue growing +19.3% and segment EBIT up +27.8%,” said Garg. Consolidated income rose 20.1% and EBIT surged 45.6%, helped by its premium positioning and diversified portfolio.
Kalyan Jewellers, however, remains more exposed. Garg warned: “Their dependence on price-sensitive customers makes them more vulnerable to demand contraction when gold prices rise sharply.”
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Where the smart money is moving
Analysts broadly agree that financiers remain better positioned in the near term. “The market is currently favouring gold-loan NBFCs over jewellery stocks given their ability to scale loans and maintain asset quality in a rising gold price regime,” said Jain.
“Gold-loan NBFCs such as Muthoot Finance and Manappuram Finance are clear beneficiaries… Markets have taken note — both stocks are trading near record highs, pricing in a favourable earnings trajectory as long as bullion prices remain elevated,” said Garg.
Jewellers may gain from festive demand or tax cuts, but until gold prices stabilise, the market dynamic appears tilted toward lenders. For investors, the question is not whether gold is a safe haven, but which gold-linked stocks belong in their portfolios.
Manappuram Finance shares closed at Rs 291.05 on Monday, just 2% shy of their record high of Rs 296.80 touched last week. Muthoot Finance also scaled fresh peaks, hitting a record Rs 2,958.80 during the session.
By contrast, jewellery counters have lagged. Kalyan Jewellers ended at Rs 504.75, still 36% off its peak, while Titan closed at Rs 3,534.25, around 9% below its all-time high of Rs 3,866.15.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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