Muthoot Finance shares plunge 14% in 2 sessions; more pain ahead?

Muthoot Finance Ltd shares continued their sharp fall for the second consecutive session in Friday's trade. The stock slumped 8.22 per cent to hit a day low of Rs 1,964.35. At this price, it has tumbled 14.37 per cent in just two trading days.

Market experts suggested investors to maintain a cautious approach on the counter as it may slip further.

"One must really wait for what the RBI comes out with. Muthoot as an entity has a significant amount of exposure to gold. Gold prices have moved significantly higher and there is a huge gap between the exit LTV (Loan-to-Value) and original LTV. Investors should wait for the final guidelines to come through," Mayuresh Joshi, Head-Equity Research at William O'Neil India, told Business Today.

"Muthoot shares are falling due to RBI's proposal for tighter regulations on gold loan companies. The stock looked weak on daily charts and can slip towards Rs 1,950 level in the near term. On the higher end, a decisive breach above Rs 2,150 will be required for further upmove," said Ravi Singh, SVP - Retail Research at Religare Broking.

We should adopt a cautious approach for Muthoot at present, said Osho Krishan, Senior Analyst – Technical & Derivative Research at Angel One.

The Reserve Bank of India (RBI) said it would soon come out with comprehensive guidelines on gold loans. "Loans against the collateral of gold jewellery and ornaments, commonly known as gold loans, are extended by regulated entities for both consumption and income-generation purposes. In order to harmonise guidelines across various types of regulated entities, to the extent possible, keeping in view their differential risk-bearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct related aspects for such loans," said RBI Governor Sanjay Malhotra.

At present, loans taken against gold jewellery or ornaments — whether for daily consumption or to support small businesses — are governed by different rules depending on the lender. The Reserve Bank now aims to bring more consistency across all regulated entities (REs), such as banks and non-banking financial companies (NBFCs).

As of December 2024, promoters held a 73.35 per cent stake in the gold loan NBFC.