Why is Muthoot Finance share price falling today?
Shares of Muthoot Finance came under heavy selling pressure on Friday, February 13, weighed by volatility in gold prices despite the company reporting a steady operational
performance for the December quarter of the current financial year (Q3FY26).
On the National Stock Exchange of India (NSE),
Muthoot Finance stock declined around 12.04 per cent in intraday trade to hit a low of ₹3,577 per share, while on the BSE Ltd (BSE), the stock slipped 12.10 per cent to an intraday low of ₹3,576 per share.
The weakness also comes amid a panic selling in the broader markets. The benchmarks – Sensex and Nifty – indices dropped 1 per cent in the intraday trade today, while the Nifty MidCap, and the Nifty SmallCap indices fell up to 2 per cent.
FOLLOW LATEST STOCK MARKET UPDATES LIVE Gold volatility weighs on Muthoot Finance
The key overhang for Muthoot Finance remains the recent sharp swings in gold prices, as per analysts. After scaling record highs earlier this calendar year amid global uncertainty and rate-cut expectations, gold has witnessed bouts of profit booking. Prices have corrected from their recent peak levels as the US dollar firmed up and global bond yields hardened, triggering volatility in bullion markets.
In the domestic market, gold prices have retreated from their highs seen in late January, with traders citing cooling safe-haven demand and intermittent risk-on sentiment globally. This pullback has sparked concerns about loan-to-value (LTV) dynamics and disbursement growth for gold financiers.
Typically, higher gold prices translate into higher loan ticket size, better collateral cover, and robust disbursement growth. Conversely, sharp corrections or elevated volatility in gold prices may make borrowers cautious, affecting incremental loan growth, and, thereby, raising concerns over collateral valuation.
Muthoot Finance Q3FY26 results highlights
Notably, the stock reaction comes despite a healthy Q3FY26 performance. On Thursday, Muthoot Finance reported a
gold loan growth of nearly 50 per cent year-on-year (Y-o-Y) to ₹1.4 trillion, a 65-basis point quarter-on-quarter (Q-o-Q) improvement in gross-stage 3 (GS3) to 1.6 per cent, aided by NPA recoveries, and spread expansion of 5 bps Q-o-Q to 11.85 per cent.
Muthoot’s net profit grew 95 per cent Y-o-Y and 13 per cent Q-o-Q to ~₹2,660 crore. This included one-off interest income of around ₹650 crore.
Net total income grew 66 per cent Y-o-Y to ₹4,620 crore, while opex increased 28 per cent to ₹920 crore. This led to a cost-to-income ratio of around 20 per cent.
The management said gold tonnage declined 2 per cent Q-o-Q and grew ~1.5 per cent Y-o-Y to 205 tonne. The customer base, however, declined ~0.6 per cent Q-o-Q to approximately 6.53 million.
Gold loan LTV also declined by 75 percentage points Q-o-Q to 55.8 per cent. The management believes gold loan growth is driven by customer need for liquidity rather than gold price movements.
“Additionally, with unsecured and MFI credit tightening, borrowers are increasingly shifting to gold-backed loans as a dependable source of funding,” Muthoot Finance said in its investor presentation.
However, investors appear to be focusing more on forward-looking risks tied to bullion prices rather than trailing quarterly numbers.
Motilal Oswal Financial Services is ‘Neutral’ on Muthoot Fin
Motilal Oswal Financial Services said Muthoot Finance reported a strong operating performance for the quarter, driven by sustained momentum in gold loan growth and higher-than-expected earnings supported by recoveries from the NPA pool and gold loan auctions.
The brokerage believes gold loan growth will remain strong over the next few quarters, supported by elevated gold prices and continued tightening in unsecured credit, which is pushing borrowers toward secured, gold-backed financing.
“As the market leader among NBFCs, Muthoot Finance is well placed to capture a disproportionate share of this incremental demand and should continue to outpace peers. We raise our FY26, FY27, and FY28 EPS estimates by 12 per cent, 9 per cent, and 7 per cent, respectively, to factor in higher loan growth and stable recoveries from the NPA pool,” Motilal Oswal said.
It factors in a standalone AUM, and PAT CAGR of around 18 per cent and 14 per cent, respectively, over FY26E-28E. It also models RoA and RoE of 5.4 per cent and 24 per cent by FY28E.
“Muthoot Finance stock trades at 3.5x FY27E P/BV and 14x P/E, and has benefited from the tailwinds of a sharp rise in gold prices, and an improvement in gold loan demand. With its ability to deliver industry-leading gold loan growth and best-in-class profitability, the NBFC is one of the best franchises for gold loans in the country,” it said, maintaining its ‘Neutral’ rating with a higher share price target of ₹4,500.
It, however, said while the operating outlook remains favorable, volatility in gold prices remains a key monitorable, as sharp movements could influence customer behavior, collateral cover, and short-term disbursement trends.
 "Muthoot Finance shares plunge 12% despite strong Q3; MOFSL stays 'Neutral'")
