Stock Down: AMCs suffer a fresh setback! Shares of HDFC AMC, Nippon, and Aditya Birla fell up to 10% due to SEBI's expense ratio rule.

News Topical, Digital Desk : Market regulator SEBI's proposal to reduce expense ratios sent asset management company (AMC) shares tumbling on Wednesday. Major stocks like HDFC AMC, Nippon India AMC, Aditya Birla Sun Life AMC, and UTI AMC fell by up to 10%. SEBI's proposals call for reductions in broker commissions and fees charged on funds, which will directly impact AMCs' earnings.

What is SEBI's new proposal?
SEBI has suggested reducing the expense ratio of mutual funds. Expense ratio refers to the fee that AMCs charge investors for fund management and operations.

According to the new draft, the upper limit for cash market brokerage fees could be reduced from 12 basis points to 2 basis points. The limit for derivative transaction fees is proposed to be reduced from 5 basis points to 1 basis point. AMCs entering the non-mutual fund business will have to create a separate business unit. Statutory charges such as STT, GST, and stamp duty will not be included in this expense limit. In addition, SEBI has also recommended a performance-linked expense ratio, meaning that if a scheme performs well, fees may increase, otherwise they will decrease.

Why did HDFC AMC's shares fall?
Morgan Stanley said that if this SEBI proposal is implemented, it could have a major impact on HDFC AMC's earnings.
According to the brokerage, if the average hit of 15 basis points occurs, it could impact FY25 pre-tax earnings by approximately 23%. Morgan Stanley has maintained an equal-weight rating on HDFC AMC with a target price of ₹5,400. Jefferies says the industry is expecting a balanced approach from SEBI, as feedback has been sought by November 17. Jefferies warned that a 5 basis point cut in exit loads could impact AMCs' profits by 8–10% by FY27. Which shares fell HDFC AMC, Nippon India AMC: Fall by 6% Nuvama Wealth Management: Down by 8% CAMS: Down by 7% Motilal Oswal Financial: Slips by 5% UTI AMC, Aditya Birla Sun Life AMC: Down by 2–3% So far in 2025, HDFC AMC's share was up by 36% and Nippon AMC's by 20%, while Aditya Birla and UTI AMC are down by 3–4% year-to-date. Ashish Somaiya, CEO of WhiteOak Capital AMC, said, "This is a positive step for investors. The reduction in transaction costs will increase fund returns." He explained that some of the 12 basis points are due to exchange fees, stamp duty, and other charges, so the actual impact could be limited to 4–5 basis points. Sandeep Bagla, CEO of Trust Mutual Fund, said, "There will be pressure on AMCs' margins in the short term, but this impact will be mitigated by industry growth in the long term." This proposal is currently in the draft stage. If SEBI implements it, transparency in the mutual fund industry will increase and retail investors will benefit, although AMCs' margins may face pressure.

Read More: Stock Down: AMCs suffer a fresh setback! Shares of HDFC AMC, Nippon, and Aditya Birla fell up to 10% due to SEBI's expense ratio rule.