Why Muthoot Finance & Manappuram Finance Shares Are Falling After RBI Policy Meeting

The Indian stock market saw a sharp decline in shares of major gold loan companies like Muthoot Finance, Manappuram Finance, and IIFL Finance on Wednesday, following a key announcement made during the RBI Monetary Policy Committee (MPC) meeting.

These stocks dropped as much as 9% after RBI Governor Sanjay Malhotra revealed that the central bank would soon issue detailed guidelines for gold loans, sparking investor concerns.

🔍 What Triggered the Fall?

The RBI Governor stated that loans backed by gold jewelry and ornaments—commonly known as gold loans—are currently offered by a wide range of regulated entities for both personal consumption and income-generation. To streamline and harmonize these guidelines, the RBI plans to release comprehensive regulations covering prudential norms and conduct standards.

While Malhotra clarified that the upcoming draft guidelines are not about tightening rules, markets reacted sharply. He said:

“I have never said that gold loan norms will be tightened. The norms will be rationalised. A draft circular will be released shortly.”

Despite this assurance, investor sentiment turned negative, likely due to the uncertainty around the scope and impact of the new rules.

💡 Why These Companies Were Affected the Most

Gold loans form a significant part of the business for these companies:

• Muthoot Finance – 98% of its Assets Under Management (AUM) come from gold loans.

• Manappuram Finance – 50% of its AUM comes from gold loans.

• IIFL Finance – 21% of AUM is gold loan-based.

This heavy dependency explains why these stocks took a hit as soon as regulatory changes were hinted at.

📉 Stock Performance Today

Here’s how the shares reacted post-policy announcement:

• Muthoot Finance opened at ₹228 and dropped to a low of ₹222. Analysts expect further decline, possibly toward ₹2,000, which aligns with the 200-day Simple Moving Average (SMA).

• Manappuram Finance broke below short-term support levels, with the next key support at ₹210.

• IIFL Finance continues trading between ₹300 - ₹350, but a breakout is expected to dictate the next move.

Rajesh Bhosale from Angel One advised caution, saying:

“Traders should avoid catching the falling knife. Use any bounce as an exit opportunity.”

📊 Market Mood Despite Repo Rate Cut

Interestingly, this market reaction came despite the RBI cutting the repo rate by 25 basis points to 6%. Typically, such a move boosts investor confidence, especially in rate-sensitive sectors. However, due to the looming uncertainty over the gold loan regulations, stocks of gold-focused NBFCs continued to fall.

📝 Final Thoughts

The sharp decline in gold loan company stocks is a direct result of market fears around regulatory changes. Even though the RBI has clarified that it doesn’t plan to tighten the norms, the lack of specifics has made investors nervous.

Until the draft guidelines are published, the market is likely to remain cautious. For now, experts suggest waiting and watching rather than making fresh investments in these stocks.

Reference from:- https://www.livemint.com/market/stock-market-news/why-are-muthoot-finance-manappuram-finance-shares-nosediving-after-rbi-policy-meeting-11744176933229.html