Abhishek Sinha
Shares of leading asset management companies (AMCs) plunged up to 9% on Wednesday after the Securities and Exchange Board of India (SEBI) proposed a major overhaul of the mutual fund fee and expense ratio structure, sparking concerns over profitability in the sector.
Top AMC stocks slide
In early trade, Nuvama Wealth Management tumbled 8.91%, while Nippon Life India Asset Management fell 6.92%.
HDFC Asset Management Company (HDFC AMC) declined 6.39%, and 360 ONE WAM slipped 5.64%.
Other players including Aditya Birla Sun Life AMC, Canara Robeco AMC, Anand Rathi Wealth, and UTI AMC also saw their shares drop by 3–4%.
SEBI’s proposed changes
In its consultation paper released on October 28, SEBI proposed several amendments aimed at enhancing transparency and reducing costs for mutual fund investors.
Key proposals include:
- Removal of the additional 5 basis points (bps) that AMCs were previously allowed to charge across mutual fund schemes.
- Revision of expense ratio slabs, with the first two slabs increased by 5 bps to cushion the impact.
- Reduction in brokerage limits — from 12 bps to 2 bps for cash market transactions, and from 5 bps to 1 bps for derivatives.
- Exclusion of statutory levies such as STT, GST, CTT, and stamp duty from the expense ratio calculation.
Additionally, SEBI suggested:
- Performance-linked expense ratios (optional for AMCs)
- Simplified eligibility norms for fund sponsors
- Digitisation of investor communications
- Reduced frequency of trustee meetings
- Elimination of newspaper ads for scheme changes — to be replaced by online disclosures
Impact on AMC profitability
Analysts have warned that SEBI’s proposals could significantly impact profitability in the AMC industry.
Jefferies estimated that profit before tax (PBT) for HDFC AMC and Nippon AMC could decline by 30–33% by FY27 if the proposed fee cuts are implemented.
Motilal Oswal Financial Services (MOFSL) noted that the removal of the additional 5 bps TER could either:
- Hit AMC earnings directly, if they absorb the cost, or
- Reduce distributor commissions, if AMCs pass on the impact.
MOFSL estimates suggest:
- Anand Rathi Wealth could see a 4.8% hit to earnings
- 360 ONE WAM may face around a 2% decline
- The impact on AMCs themselves would likely remain below 0.5%
Sector outlook
While the proposed changes aim to enhance investor transparency and cost efficiency, they also raise concerns about pressure on AMC margins and distribution economics in the near term.
Market experts believe the final framework — once implemented — could reshape India’s ₹55 trillion mutual fund industry, balancing investor protection with sustainable fund management practices.
Disclaimer:
This article is for informational purposes only. The views and recommendations mentioned are those of individual analysts or brokerage firms. Investors should consult certified financial advisors before making investment decisions.
