Gold Boom: How Import Tariff Hikes are Shaping the Market

Amid soaring gold prices, Indian gold financing firms Manappuram Finance and Muthoot Finance saw their shares rise sharply following the government's decision to increase import tariffs on gold and silver to 15%. The move aims to curb imports, protect foreign reserves, and address currency pressures.

On a day marked by hikes in import tariffs on precious metals, shares of gold financing firms Manappuram Finance and Muthoot Finance closed Wednesday on a high note. With the government raising tariffs on gold and silver from 6% to 15%, Manappuram saw a rise of 5.63%, closing at Rs 309.55 on the BSE, while Muthoot climbed 4.65% to Rs 3,507.85.

Experts indicate that the increased tariffs aim to curb non-essential imports and conserve India's foreign exchange reserves, which are currently under pressure due to significant oil and fertilizer purchases. Sumit Singhania, from Bajaj Broking, believes that gold financing firms will benefit from the heightened collateral values of gold loans.

The hike comes amid a backdrop of rising demand and ballooning prices of gold, India's second-largest commodity import after crude oil. These factors have negatively impacted the rupee. The government's measures, including Prime Minister Narendra Modi's appeal to reduce gold purchases, are intended to stabilize the currency and local market conditions, according to financial analysts.