A lower risk appetite among investors has driven gold, traditionally a safe-haven asset, to record highs so far this year. Fuelled by geopolitical tensions in West Asia, robust demand from central banks - particularly in Asia - and US President Donald Trump's tariff volleys, spot gold touched an all-time high of $2,956 per ounce on February 24 in the international markets.
Shares of gold finance companies Muthoot Finance and Manappuram Finance hit their respective all-time highs, gaining on the BSE during Wednesday on expectation of healthy earnings. In comparison, the benchmark BSE Sensex was down 0.14 per cent, closing at 85,408.
The Enforcement Directorate on Thursday said it has frozen assets worth Rs 143 crore of prominent Kerala-based NBFC Manappuram Finance Ltd's MD and CEO V P Nandakumar after it conducted raids as part of a money laundering investigation. A total of six premises in Thrissur, where the company is headquartered, were covered during the searches that were launched on Wednesday. The case pertains to allegations of money laundering through "illegal" collection of deposits from the public, the agency said in a statement.
'Defence, capital goods, engineering, capital market-related stocks, autos, and cement sectors are my bullish bets for Samvat 2082.'
The Reserve Bank of India's (RBI's) draft guidelines on gold loans, if implemented in their current form, are expected to impact non-banking financial companies (NBFCs) and mid-tier banks in the near term, more significantly than larger banks, according to analysts.
The Reserve Bank of India (RBI) on Wednesday came out with comprehensive draft guidelines to harmonise and regulate gold loans across all financial entities, including putting a cap of 75 per cent on loan-to-value (LTV) ratio. The draft guidelines also aim to address concerns related to certain lending practices, provide clarity on specific aspects, and strengthen the conduct-related standards in the sector.
Overseas fundraising by Indian firms is experiencing a robust revival in 2024, following a lacklustre 2023. This resurgence is primarily driven by strong demand for high-yield bonds from international investors amid improving liquidity conditions and reduced hedging costs. Indian companies raised ~32,619 crore through overseas bonds in the first half of 2024, surpassing the total amount raised via such instruments in the entire 2023, which stood at ~31,218 crore, according to PRIME Database. In comparison, ~45,237 crore was raised in 2022 and ~1.05 trillion was secured in 2021.
Despite gold prices hitting record highs, analysts aren't gung-ho about the outlook for gold financiers Muthoot Finance and Manappuram Finance. This, they said, was due to intense competition from banks, coupled with stagnating loan books and likely pressure on margins.
Fitch Ratings on Wednesday said the recent search by the enforcement directorate at gold-backed lender Manappuram Finance highlights corporate governance challenges that can arise in emerging markets like India. "Such searches need not lead to further regulatory action, but investigations raise reputational risk that could tarnish a lender's business prospects and constrict funding access due to reduced market confidence - potentially affecting an issuer's credit profile - even if no wrongdoing is identified," Fitch added. The rating agency said Manappuram Finance Ltd has disclosed that the Enforcement Directorate's search at its premises pertained to legacy non-compliant activities at its branches up until 2012.
Loan against gold as a product is catching on fast. Let's keep the momentum going, but aim for sustainable growth. A few bad apples should not ruin the brunch, argues Tamal Bandyopadhyay.
In mid-March this year, the finance ministry asked state-run banks to review their gold loan portfolio for the two-year period between January 1, 2022, and January 31, 2024. This business had grown at a fast clip. Reserve Bank of India (RBI) data has it that it grew 15 per cent to Rs 1 trillion in FY24. Now, in recent times, any kind of exuberance in financial services has seen the authorities swoop down - be it pushing the lines on governance or unsecured credit.
This is a good opportunity for long-term investors to pick quality small and midcap stocks at reasonable valuations.
Manappuram declared consolidated assets under management (AUM) growth of 27 per cent year-on-year (Y-o-Y) (5.1 per cent quarter-on-quarter or Q-o-Q) to Rs 38,950 crore. Net interest income (NII) saw a margin expansion of 24 basis points (bps) Q-o-Q to 15.44 per cent.
Gold loan companies offer loans to financially-excluded customers and MSMEs by enabling them to monetise their gold without the need for documentary proof of income
Gold prices hit record high in the third week of March as fears of bank collapses and high inflation led investors to the traditional safe haven. Gold prices are often inversely correlated to dollar strength because the international price is dollar-denominated. The Federal Reserve's (Fed's) stance indicates that the dollar may appreciate further since it is prepared to keep pushing up policy rates. But demand for gold is also up - the World Gold Council claims central banks are buying in addition to private demand.
Shares of gold loan companies like Manappuram Finance and jewellery makers on Monday fell sharply by up to over 13 per cent, following weakness in gold prices which hit over 15-month low.
They have sought data from these companies on loss absorption capacity in case of a fall in gold prices and higher defaults.
Making a call on gold price trends through 2013 will be a toss-up.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
'India has about 22,000 tonnes of private gold, held by individuals and temples.' 'Much of this is locked up in safes and vaults as a dead investment. If we can put the vast reserves of gold to use, it would boost the economy,' says V P Nandakumar, executive chairman, Manappuram Finance, India's first listed gold loan company.
While taking gold out of the closet to borrow money is no longer taboo in Indian households, the sharp drop in gold prices is hitting the newest loan product on the banking turf hard, explains Tamal Bandyopadhyay.
The amount you can raise via a gold loan is higher than you can get via a personal loan.
The broader markets were marginally higher with mid-caps and small-caps gaining 0.1-0.4 per cent on the BSE.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
For the first time, consumers, including those at the so-called bottom of the pyramid, are monetising gold by taking loans from banks, offering the yellow metal as collateral, says Tamal Bandyopadhyay.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Aptech, Lumax Industries, Vedanta, Indian Bank, Venky's India have appreciated over 200% in a year
Mannapuram Finance, Mahindra and Bharti Axa are some of the firms known to have bought office spaces worth more than Rs 100 crore
This measure will ensure that the price of a scrip cannot move upward or downward beyond a limit set for the day.
In 2014, gold prices had fluctuated between Rs 27,000 and 30,000/10g.
How did marquee Dalal Street investors fare in the Jan-Mar quarter that saw the BSE Sensex tank 10 per cent?
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Markets ended flat on Tuesday, amid a volatile trading session, as investors exercised caution ahead of the two-day FOMC meet starting today and Reserve Bank of India's monetary policy later this week.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Strong MF investments, stemming of FII outflows and positive earnings in Q3 have helped market, say analysts.
'Kerala isn't as dependent on agriculture like Bihar or Odisha or even other southern states.' 'Economic losses would not be too intense, unlike other states.' 'The floods could, at best, impact India Inc's earnings for a quarter or two.'
In the past three years, personal loans have grown at twice the rate of growth in personal disposable income, leading to a steady rise in household indebtedness. At the end of March this year, Indians owed Rs 25.2 lakh crore to banks and listed non-banking finance companies (NBFCs), up 65 per cent in the past three years.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Gold prices fell to a 5-year low of less than $1,100/ounce.
The S&P BSE Sensex plunged 301 points to close at 25,490 and the Nifty50 fell 86 points to end at 7,815.
Ajit Mishra, Vice President, Research, Religare Broking, answers readers' stock market queries. Ajit will offer his unbiased views on a weekly basis
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