Gold finance stocks: Recent rally increases risk; wait for a better entry

Rally factors in strong performance of Muthoot and Manappuram

Even as a majority of the banking and financial services sector companies, including mortgage lenders, auto loan providers as well as banks, have been struggling in the wake of the Covid-19 pandemic, gold financiers have been in a sweet spot.

The stocks of Muthoot Finance and Manappuram Finance have gained between 100 per cent and 131 per cent since their March lows, outperforming the 28-per cent rise in the Nifty Financial Services Index during this period.

The strong performance of their core gold loan book (65-95 per cent of consolidated assets under management or AUM) is a key reason for the improved