Gold Financiers: Investors advised to book profit on these stocks

Risks are similar to loan against property; both are dependent on pricing strength and demand of the underlying assets

There aren’t many takers for stocks of non-banking finance companies (NBFCs), but Manappuram Finance and Muthoot Finance seem to be the outliers, with their stocks more than doubling from their March lows, as a result of an exponential rally in gold prices during this period.

Primary market price for gold may be firming up. However, for lenders, the auction rate or secondary market price is more critical. This is the price at which they liquidate the stock in case of defaults, and this price is often at a significant discount to primary market rates. In other words, gold financiers lend based