HDFC AMC, Nippon Life India's Target Prices Cut By HSBC Amid SIP Pull-Out

HSBC Global Research has cut the target prices of HDFC Asset Management Co. and Nippon Life India Asset Management Ltd. as growth outlook has weakened for such companies due to rising discontinuation of Systematic Investment Plans. The brokerage is cautious on asset management industry due to lack of near-term triggers.

For Nippon Life India, it has also downgraded the rating to 'hold'.

It cut HDFC Asset Management's target price to Rs 3,900 from Rs 4,350. The current target price implies 0.92% upside potential. It also cut target price of Nippon Life India Asset Management's to Rs 550 from Rs 840, implying a 2.12% upside.

The brokerage cut HDFC AMC's AUM estimates by 3–8%, while Nippon Life India Asset Management's AUM estimate was slashed by 11%. However, the former witnessed less erosion in its assets under management, compared to industry, on support from scheme performance, distribution reach and brand.

Outlook for AUM growth remained weak due to expected pressure on net flows and negative mark-to-market. Persistent losses in equity markets is also acting as a key negative factor for asset under management growth. Industry's AUM in equity and hybrid schemes fell 8% between December 2024 and February because of negative mark-to-market.

SIP discontinuation is rising rapidly and yet to disrupt gross inflows. In HSBC Global Research's view, net SIP addition remains negative due to a slowdown in fresh SIP creations and high discontinuation impacting gross flows, the brokerage said.

Of the total equity AUM, 37% is under SIP plans. About one-fourth of the SIP has a holding period less than one year, where individuals could see negative returns. And propensity of redemption in SIPs involving mid and small caps will be high because of negative mark-to-market in these schemes.

There's limited scope for asset management companies to reduce operating cost, according to HSBC. In nine months of financial year 2025, AUM growth was higher than operating costs, which gave good leverage to these companies. However, AUM growth has now come under pressure and yield would also moderate due to telescopic pricing. These companies are now trying to lower the yield pressure by reducing commissions.

HDFC Asset Management Co and Nippon Life India Asset Management Co shares have declined 1.01% and 1.15%, respectively so far on Thursday. The stocks were trading 0.70% and 0.60% lower, respectively as of 9:54 a.m.