AMCs look strong but high valuations risk sharper fall in downturns

Companies have strong cash conversion, predictability and growth runway

Given gains in equity prices, it is not surprising that the earnings of asset management companies (AMCs) are growing quicker. The earnings momentum looks set to continue. Good fund performances have thus led to AMC earnings upgrades although valuations are high.

Recent market performance and net flow trends have led to earnings upgrades by between 3-8 per cent for FY25-27. Stronger equity AUM and earnings growth is expected for HDFC AMC and for Nippon (NAM), given superior fund performances. Both have strong systematic investment plan (SIP) books and manage several high-performing funds.

Valuations reflect this. AMCs trade