Gold Has Brightened This Year: Should You Invest In Gold Financiers?

Gold on resurgence in coronavirus cases globally due to the new mutuant strain and fresh lockdown imposed to combat it, there has been a sudden spike in gold rates, which has risen to 8 month high. Also the increased liquidity due to the recent dole out of the US stimulus, has imparted weakness to the greenback to the two and a half year low.

Now, on the MCX in Tuesday's trade gold has been trading flat today and is above Rs. 51000 per 10 gm, after scaling to its fresh life time high of Rs. 56200 in August this year on the bourse. And internationally gold has moved past levels of $2000 per ounce

So, amid all the buzz around will betting on gold loan financiers be rewarding, here is discussed the same below:

Now, gold financiers stand to gain as the prices of gold zoom and there is traction for gold loan in the market and also as such loans are backed by collateral in the form of gold loan kept with these institutions they do not confront asset quality issues as with other loans.

Also, another thing that needs to be brought to the potential investors in these gold financiers is that with rise in gold prices, safety margin of gold loan companies on gold loan increases. Safety margin is the difference between the market value of gold in ornaments and the loan amount given to customers against these loans. So, indeed rise in gold price augurs well for these gold financiers.

1. Muthoot Finance:

The stock last quoted at Rs. 1262 and after trading sideways from mid-August 2020 with a breakout level placed at Rs. 1320. The trend looks good as the counter is trading above the 200-days moving average placed at Rs. 1059. Moreover, the Moving Average Convergence Divergence (MACD) is well placed above the zero line, which is suggestive of a positive momentum ahead. The immediate support comes at Rs 1,200 levels.

2. Manappuram Finance Limited:

Now as long as the scrip finds support of 50-WMA placed at Rs. 150.4 level. And for the breakout on the higher side, the stock needs to absorb all of the selling pressure it is seeing around Rs. 180. And now if the scrip sustains above levels of Rs. 180, it shall gain up to Rs. 210

3. SBI:

It also has a good share in gold loan portfolio with low gold loan interest rate. And now as the scrip recently crossed its 200-WMA, placed at Rs 273, triggering the upside bias towards Rs 320 levels. The levels shall be likely seen, if the stock closes above Rs. 260 levels.

 

Catholic Syrian Bank

There has come to light that gold loan portfolio for the CSB Bank has gained tremendously to Rs. 5633 crore and on a sequential basis grew 14 percent. And amid the filing, there is suggested that the CSB scrip after breaking the 50-wma at Rs. 237, the stock witnessed selling pressure. And now the stock is seeing a resistance at Rs 229.50 levels. The stock now needs to scale 100-WMA and 50-WMA (placed at Rs 235) to encourage buying momentum. The counter may see aggressive selling build-up if the support of Rs 210 is broken decisively.