COVID-19 pandemic affects the market enormously. The stock market across the world was gloomy at the initial phase which resulted in the crashes of certain share markets . In India, the financial markets are witnessing sharp volatility currently as a result of the fallout in the global markets. Now people are more interested in investing in gold because during this pandemic situation the value of gold goes up day by day so most of the leading players choose gold as their collateral security.
There are a lot of factors that can influence the demand or price of the gold. As with any tradable instrument, supply and demand are at the heart of the market, and also several other factors like usage in the central bank reserves, level of confidence in the global markets, some kind of geopolitical factors, changes in the jewelry demand are some amongst them. And another notable thing is that unlike the other commodities, gold is often used by central banks to diversify the reserves. During the coronavirus pandemic, all the Indian lenders have seen its shares surge in stark contrast. The Muthoot Finance Ltd., India’s largest cash-for-gold lender by an asset, has soared around 41% this year by beating all but two on the 103-members S&P BSE Finance Index.
Indian households have recorded a gold hoard of Rs 24,000 tonnes worth $ 800 billion. While the main driver of the Indian demand will continue to be jewelry, the consumption regarding the bars and coins is expected to be substantially higher. Pawning gold ornaments with lenders like Muthoot to tide over a cash crunch as the pandemic led to job losses and credit crunch. Gold price is hitting records during the pandemic condition also. So, we can consider this as a season of gold and the season of gold loans.
The Chief Financial officer of Federal Bank Mr. Ashutosh Khajuria mentioned that whenever the uncertainties regarding the business cycles happen gold loans grow the fastest and it may last at least still the end of the financial year. Muthoot’s Chief Financial Officer Mr. Oommen K Mammen forecasts 15 percent growth from lending against gold to farmers, agri-traders, truck owners. The firm’s gross gold-loan asset stood at 416 billion rupees against the collateral of 176 tonnes of the Metal as of March 31, documents show. Investors buy shares from Muthoot for three reasons are Credit quality, low leverage ratio, and unique business model. Gold doubles in our economy like an insurance policy and a retirement plan in India which may disrupt the social welfare system.
