Why are Muthoot Finance, Manappuram Finance shares nosediving after RBI policy meeting?

Shares of gold financing firms, including Muthoot Finance Ltd, Manappuram Finance Ltd, and IIFL Finance Ltd, dropped by as much as 9% on Wednesday following an announcement by RBI Governor Sanjay Malhotra regarding the upcoming release of detailed guidelines on gold loans.

The RBI Governor mentioned that loans secured by gold jewelry and ornaments, often referred to as gold loans, are provided by regulated entities for both consumption and income-generating uses.

“In order to harmonise guidelines across various types of regulated entities, to the extent possible, keeping in view their differential riskbearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct related aspects for such loans,” said RBI Governor Sanjay Malhotra.

Further, during a press conference today, Governor Sanjay Malhotra assured that he has never claimed that gold loan regulations will be tightened.

“I have never said that gold loan norms will be tightened. Have never said tightening in my statement w.r.t. gold loan guidelines. But norms will be rationalised. Draft gold loan circular will be out in public domain very shortly,” said RBI Governor Sanjay Malhotra.

According to media reports, gold loans account for 98% of Muthoot Finance's total Assets Under Management (AUM), whereas for Manappuram and IIFL Finance, this percentage is 50% and 21% respectively of their overall AUM.

Anshul Jain, Head of Research at Lakshmishree Investment and Securities explained that Muthoot Finance and Manappuram Finance have significant exposure to gold loans. As the RBI announced in the MPC meeting that it would issue comprehensive guidelines on loans against gold, the market is reacting to that development.

Stocks in focus today

Muthoot Finance share price today opened at ₹228 apiece on BSE, the stock touched an intraday high of 228.55 per share, and an intraday low of ₹222 per share. According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One,Muthoot Finance share prices have seen sharp fall in today's session dropping around 10%, Prices may slip further towards 200dsma at 2,000 levels. Traders should avoid catching falling knife, any bounce should be used to exit longs , resistance is seen around 2,150.

Further, Bhosale explained that IIFL Finance share price is trading in a range of ₹300 - 350 since last few weeks, next directional move would be seen only on a range breakout beyond the same. Also, Manappuram Finance share price have broken below short term support and can slip further 210 would be next support.

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