Jefferies updated its India model portfolio on August 28, 2026, adding Manappuram Finance and MCX, citing the massive potential of the country's $3.9 trillion gold market. The brokerage believes rising gold prices make gold-backed loans more attractive for both lenders and borrowers. Investors should remain mindful of risks, including gold price volatility and increasing competition in the gold lending space.
Brokerage firm Jefferies has updated its India model portfolio as of August 28, 2026, highlighting a shift in how Indian households are using their gold holdings. The firm has included Manappuram Finance and the Multi Commodity Exchange of India (MCX) in its portfolio, betting on the trend of turning stagnant household gold into active credit.
The core of the thesis lies in the valuation of Indian gold. As of March 2026, Indian households hold an estimated $3.9 trillion worth of gold. Despite this massive figure, only about 15% of this gold is currently used as collateral for loans. Jefferies suggests that as gold prices stay elevated, the value of collateral held by lenders rises, allowing them to issue larger loans and potentially expand their market share.
For Manappuram Finance, this trend aligns with their recent business performance. The company reported strong growth in the first quarter of fiscal year 2027, showing a 57% year-on-year rise in its assets under management. The brokerage view is that lenders who can capture this shift by offering easier access to credit against gold are well-positioned for growth. Similarly, MCX is seen as a beneficiary of this trend, as higher activity in the gold market typically drives up trading and hedging volumes on the exchange.
While the growth outlook for gold-backed lending is significant, investors should also consider the potential risks. Gold prices are subject to global market volatility. If gold prices were to drop sharply, the collateral value of pledged assets would decrease, which can impact asset quality and recovery rates for lenders. Additionally, the gold loan sector in India is highly competitive. Lenders like Manappuram Finance face constant pressure from established players, including Muthoot Finance and IIFL Finance, as well as banking institutions that are aggressively expanding their gold loan books. This competition can sometimes lead to margin pressure, as lenders may need to offer competitive interest rates to attract borrowers.
Another factor to watch is the macroeconomic impact. High levels of gold imports can influence the country's current account deficit, which is a broader indicator of economic stability that investors often track. Furthermore, the overall profitability of gold loan companies depends on their ability to manage operational costs and credit risk effectively, even when the demand for credit is high.
Looking ahead, the next important updates for investors will be the continued trend in gold price movements and the quarterly growth figures from these companies. Monitoring how much of the unmonetized gold enters the formal lending system will be key to understanding whether this growth thesis remains on track.