Nomura backs Indian AMCs amid retail surge; Nippon Life, HDFC AMC top picks

Global brokerage Nomura has reaffirmed its positive stance on India’s asset management companies (AMCs), citing sustained retail equity participation and steady inflows that continue to underpin AUM growth.

 

In its latest review, Nomura has termed Nippon Life India Asset Management (NAM) and HDFC Asset Management Company (HDFC AMC) as its top picks, pointing to their strong AUM and operating profit trajectories.

 

“Premium valuations are likely to sustain. We prefer NAM and HDFC AMC given their scale advantage, robust cash flows, high dividend payouts (75–90 per cent), and strong RoEs (30 per cent+), which are likely to support premium valuations in the sector,” said Nomura in its research note.

 

Strong industry momentum

 

Equity schemes have been the key driver, with equity AUM expanding tenfold over the past decade. Equity’s share in overall AUM rose to 59 per cent in FY25 from 34 per cent in FY15.

 

“We expect equity AUM to maintain a 20 per cent CAGR over FY25-28F, supported by sustained inflows and the continued dominance of systematic investment plans (SIPs),” Nomura noted.

 

The brokerage said equity inflows have historically driven 52 per cent of industry AUM accretion. SIPs now account for 26 per cent of gross inflows versus the 22 per cent average over FY17-25. While average equity inflows (ex-arbitrage) in FYTD26 are tracking below FY25 levels, they have already surpassed ~7 per cent of opening AUM for the year.

 

With the Nifty 50 up 11 per cent in FYTD26, Nomura believes the combination of flows and market gains should keep AUM growth stable. The brokerage also flagged the sector’s low penetration: 57 million unique investors in 2QFY26, about 4 per cent of India’s population. Mutual funds accounted for 13 per cent of household financial savings in FY25, up from the average 6 per cent recorded between FY15-25.

 

Nomura expects healthy net inflows to continue as AMCs roll out new offerings such as specialised investment funds (SIFs) and extend their reach deeper into tier-II and tier-III markets.  CATCH STOCK MARKET LIVE UPDATES TODAY

Equity, passive categories to steer growth

 

Citing that the mutual fund (MF) industry delivered a strong AUM CAGR of 20 per cent over FY15-25, Nomura expects growth momentum to remain healthy at 19 per cent CAGR over FY25-28F.

 

“While the MF industry clocked a 20 per cent AUM CAGR between FY15-25, growth in debt (+4 per cent) and liquid (+16 per cent) categories has been modest, with equity (+26 per cent) and passive (+52 per cent) segments leading the expansion,” the brokerage said in its report.

 

Notably, 72 per cent of passive AUM is in equity Index/ETFs. This, Nomua believes, highlights increasing investor preference for higher-yielding investment categories and expects the trend to continue.

 

On regulatory proposals, the brokerage pointed to Sebi’s consultation paper on removing additional charges on schemes with exit loads. “Although the latest Sebi consultation paper proposing removal of additional charges on schemes with exit loads, if implemented, would hurt revenue yields, we expect AMCs to restructure distributor payouts to mitigate any revenue loss,” it said.

Operating profitability to hold firm

Nomura has projected AUM CAGRs of 21 per cent for NAM, 19 per cent for HDFC AMC, and 17 per cent for UTI AMC over FY25-28F. While the telescopic TER framework may limit revenue growth relative to AUM expansion, the brokerage expects the favourable equity mix and operating leverage to support earnings.

 

“We expect average core PBT yields to remain stable at 26bp/38bp/19bp for NAM/HDFC AMC/UTI AMC over FY26-28F,” it said.

 

Equity AUM market shares for NAM and HDFC AMC have been on an upward trajectory, Nomura noted. Since March 2022, NAM’s share has risen 143bp and HDFC AMC’s by 79bp. On a trailing 12-month basis, HDFC AMC has largely maintained its equity AUM share, NAM has gained 5bp, while UTI AMC’s share has declined by 20bp. 

 

“We will continue to monitor market share movements for HDFC AMC and NAM,” said Nomura. 

 

(Disclaimer: Nifty target and outlook has been suggested by Nomura. Views expressed are their own.)