Jefferies has updated its India model portfolio, adding stocks like Manappuram Finance to tap into the country's vast household gold wealth. The brokerage views the formalization of gold loans as a growth driver, though investors should monitor risks like stricter RBI guidelines and national import costs.
Global brokerage firm Jefferies has reshuffled its India model portfolio, shifting its strategy to capitalize on what it calls the 'gold wealth effect.' On August 28, 2026, the firm added several companies to its portfolio, signaling a pivot toward tapping into the estimated $3.9 trillion in gold held by Indian households. Jefferies suggests that moving this dormant asset into the formal financial system through gold-backed loans can act as a significant economic stimulus.
Targeting the Gold-Loan Market
The central pillar of this strategy is the inclusion of Manappuram Finance. The brokerage notes that the formal gold-loan market has expanded by roughly 73% over the past two years, with significant room for growth as only about 15% of total household gold is currently used as collateral. By betting on lenders who help families unlock the value of their gold, Jefferies is positioning its portfolio to benefit from this shift in consumer borrowing habits.
Strategic Additions and Exits
Beyond gold-backed lending, Jefferies has made broader changes to capture different economic trends. The firm added Navin Fluorine, citing an expected 23% compound annual growth rate in earnings per share through fiscal year 2029, supported by the company’s specialty chemicals and cooling products business. It also included Meesho to gain exposure to mass-market consumer spending and added Hindustan Zinc as a way to benefit from the ongoing rally in silver prices.
These additions were funded by reallocating capital from existing holdings. The brokerage reduced its exposure to Bajaj Finance and exited positions in Ambuja Cements and Jindal Stainless. Despite these exits and reductions, Jefferies maintains 'Buy' ratings on the shares it trimmed, indicating that the move is a strategic shift to prioritize high-growth segments rather than a loss of conviction in the companies it sold.
Important Risks and Monitorables
Investors should be aware of the specific risks associated with this gold-centric strategy. While the formalization of gold lending is a potential growth area, it faces regulatory hurdles. The Reserve Bank of India (RBI) has introduced stricter draft guidelines regarding gold-backed lending, which could impact the profit margins and operational growth of non-banking financial companies (NBFCs) in this sector.
There is also a broader macroeconomic concern. India’s gold imports have risen sharply, reaching $79 billion in fiscal year 2026. This increase puts pressure on the country's balance of payments, which is the difference between money coming in and money going out of the country through trade. Furthermore, gold-loan companies face the inherent risk of collateral value volatility. If global gold prices drop sharply, the value of the security held against loans could fall, potentially affecting the quality of these loan books.
Moving forward, the primary items for investors to track include the final implementation of RBI's gold lending rules, the trend in gold import numbers, and the ability of gold-loan lenders to maintain profit margins despite increasing competition in the space.