Correction in gold loan stocks overdone

While stocks of Muthoot Finance and Manappuram Finance fell, impact of new lending norms is limited

Stocks of gold lenders — Muthoot Finance (Muthoot) and Manappuram Finance (Manappuram) — fell 6-7 per cent on Friday even as the S&P BSE Sensex remained flat. Part of this weakness can be attributed to a sharp rally in these stocks over the past one year. As against an 18 per cent increase in the Sensex, the Muthoot and Manappuram stocks surged 91 per cent and 159 per cent, respectively. Thus, there could have been some profit-booking in these stocks. This weakness could also be attributed to the fact that the RBI on Thursday lowered the maximum amount of cash