InvestorQ : Why has the stock of Muthoot Finance crashed so sharply on 30 March? Do you suggest me to exit the stock?
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Why has the stock of Muthoot Finance crashed so sharply on 30 March? Do you suggest me to exit the stock?

Answer
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Anamika Sodhani answered.
7 months ago


On 30 March, the stock of Muthoot Finance, one of India’s largest gold finance companies, was down by 10% in early trades after the company was downgraded by Fitch. In the aftermath of the Coronavirus, Fitch has raised the risk metrics of the group and has hence downgraded the credit standing of the company. Fitch expects that the lockdowns following the COVID-19 syndrome could lead to greater defaults by consumers and also tighter funding conditions. The IDRs of the company have also been placed under rating watch with negative implications. However, I to believe that the stock of Muthoot Finance may not fall as sharply as the other NBFCs since most of its loans are gold backed and the price of gold has been consistently moving up in the last one year. Hence funding constraints should not really hit these companies. You can use dips to add on to the stock.