AMCs rally as Sebi softens expense cuts; HDFC AMC, Nippon Life jump over 5%

The lower-than-planned cuts and the removal of the overhang of impending changes to the fee structure that had persisted over the past two years led to a rally in stocks of AMCs and allied sectors

Shares of asset management companies (AMCs) rallied up to 7 per cent on Thursday after the Securities and Exchange Board of India (Sebi) announced milder cuts to the mutual fund (MF) fee and brokerage expense caps than initially proposed.

 

As compared to the consultation paper released in October, the revised expense structure approved by the regulator on Wednesday was seen less punitive on two fronts — brokerage cost caps and maximum expense ratio chargeable by equity schemes with assets of over ₹2,000 crore.

 

The new expense ratio slabs are largely in line with the existing ones and only differ from the structural point of view. To ensure higher transparency, Sebi has mandated fund houses to provide a break-up of the charges that investors pay. The total expense ratio (TER) will have two broad components — base expense ratio (mostly the fund management fee) and statutory levies such as STT/CTT, GST, stamp duty, Sebi fees, exchange fees, etc.

 

Sebi has released new expense ratio slabs based on the base expense ratio (BER). The cap has been lowered across slabs, considering that statutory levies are outside of the BER.

 

The decrease in fee caps is lower than earlier proposed.

 

“The BER thresholds proposed for equity-oriented schemes in the consultation paper dated October 28, 2025 (i.e. for slabs with assets under management, or AUM, of ₹2,000 crore and above) have been revised upwards to limit the impact on the cost structure of AMCs, broadly to the extent of exclusion of statutory levies from the BER limits,” Sebi said on Wednesday.

 

According to an analysis by PL Capital, the expense ratio across slabs has been cut by 10 basis points (bps) compared to the proposed 15 bps.

 

In the case of brokerage costs, the cap has been lowered from 8.59 bps to 6 bps for cash market transactions, and from 3.89 bps to 2 bps for derivative transactions. In the consultation paper, the charges were proposed to be capped at 5 bps and 1 bps, respectively.

 

"This would be negative for brokers but the impact would be relatively lower than what was proposed in the previous discussion paper. Rough estimates suggest that revenue may be affected for cash transactions by 15-20 per cent and 3-5 per cent for derivative transactions," PL Capital said in a report.

 

The proposal to do away with the leeway with fund houses to charge extra 5 bps to schemes with exit loads was approved without any change.

 

The lower-than-planned cuts and the removal of overhang of the impending changes to the fee structure that was there for the last two years led to a rally in stocks of AMC and allied sectors. HDFC AMC gained the most at 7.2 per cent. Nippon Life India AMC also went up 5.8 per cent. ICICI Prudential AMC, which is set to list on exchanges on Friday, has also reportedly seen a surge in grey market premium to nearly 20 per cent.