HDFC AMC, Canara Robeco, other AMC shares rise up to 8.5% after SEBI revises expense ratios

However, these are higher than the reduction proposed in the market regulator's consultation paper issued in October, when it had proposed reducing brokerage and transaction costs to 2 bps for cash transactions and to 1 bps for derivatives. SEBI has also removed the additional 5-bps expense allowance, which is charged on schemes with exit loads.

At 9:35 am on December 18, Nifty Capital Markets index was trading 2% higher with Nippon Life AMC and HDFC AMC rising 5% and 7%, respectively. Shares of UTI AMC and ABSL AMC climbed 2.5% and 1.7%, respectively.

Recently-listed Canara Robeco Asset Management Company Ltd shares rose 8.5% at Rs 312 apiece.

SEBI’s final decision on the much debated mutual fund total expense ratios (TER) has come as a relief for fund houses and brokerages, as the regulator has reset the expense structure to a lower overall base and aligned brokerage caps closer to prevailing industry levels on a post-tax basis.

Under the revised framework, the maximum expense ratio for open-ended equity schemes with assets below Rs 500 crore has been reduced from 2.25% to 2.10%, while the ceiling for debt schemes in the same AUM bracket has been lowered from 2% to 1.85%. Overall, active equity funds will now operate within an expense ratio range of 0.95% to 2.1%, while fixed income funds will be capped between 0.7% and 1.85%, depending on AUM size. For schemes managing more than Rs 50,000 crore, the cap will be 0.95% for equity schemes and 0.7% for debt schemes.

A key change is the replacement of the Total Expense Ratio (TER) with the Base Expense Ratio (BER). SEBI has kept external levies such as GST, stamp duty, Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and other statutory charges outside the BER. As a result, the BER will now only include fund-level costs such as management fees, distribution brokerage and RTA charges, with taxes disclosed separately.

Global brokerage Citi said the impact is almost neutral for large asset management companies and slightly positive for mid-scale firms with high distributor payouts.

Citi added that wealth managers like Nuvama, 360 One will see minimal impact of less than 1% of consolidated revenue, which were trading 4% and 1% higher, respectively.

"Assuming no pass through of the 5bps equity TER cut, core earnings for listed AMCs (except CRAMC) would be affected by 8-9%. However, the 5 bps impact seems to be priced in, as listed AMC stocks had corrected by 4-5% after release of the October 2025 discussion paper, suggesting that consensus earnings have assumed a 50% pass through.

"Lesser TER reduction of 10 bps (vs 15 bps earlier) related to GST on management fees might be neutral from a profitability standpoint for larger AMCs (Top-6) while it could be slightly positive for smaller AMCs. Hence there is no material change in core earnings of our coverage AMCs," said PL Capital.

JM Financial Services expects only a marginal impact of the market regulator's latest regulations on asset management companies, brokerages, and distributors, effective Apr. 1. "The separation of levies while changing the TER structure should counter the impact from removal of exit load, while the cut in brokerages is much lower than initially proposed," the broking firm said in its report.

The impact of change in slabs and removal of exit load will be 2-3 bps, which would result in a 2-4% hit to revenues of AMCs in FY27 and a 3-4% hit on their net profits, it said. This is significantly lower than the 6-8% impact the broking firm had estimated after SEBI's consultation paper issued in October.