HDFC AMC, Motilal Oswal, IIFL Capital And Other AMC Stocks Down In Trade — Here's Why
Capital market and asset management company (AMC) stocks are facing pressure in trade on Wednesday, on the back of Securities & Exchange Board of India's (SEBI) coming out with a consultation paper on mutual funds.
Shares of HDFC AMC and Nippon Life India Asset Management are trading with cuts of more than 4%, while Nuvama Wealth Management and Aditya Birla Sun Life AMC have fallen more than 3%.
More pain is being witnessed in Motilal Oswal Financial Services, which is trading with cuts of almost 7% while IIFL Capital has fallen 10%.
The pain in capital market stocks largely comes after SEBI's paper on mutual funds, which proposed widespread changes to the way MFs are charged. It also proposed measures to add more transparency.
The focal point of the proposal is the reduction in brokerage and transaction cost that can be tied to a fund. The market regulator has proposed a mechanism to cap brokerage for cash market trades at 2 basis points, which is much lower than the current 12 bps. For derivatives, the cap would be lowered from 5 bps to just 1 bps.
In another significant move, SEBI has proposed removing the transitory 5 bps additional expense that AMCs were allowed to charge on their entire assets under management (AUM) since 2018.
In order to offset this move, the regulator suggested a simultaneous 5 bps increase in the base Total Expense Ratio (TER) slabs for open-ended active schemes.
SEBI's consultation paper on mutual funds, if implemented, is a risk to earnings for AMCs, according to a Jefferies report.
The most severe impact is likely to be seen from the proposed “cut of 5 bps in equity exit loads.”
Jefferies estimates this change alone could reduce the FY27 profit before tax (PBT) for major listed players like HDFC AMC and Nippon India AMC by a substantial 30-33%.
Earlier in the day, Anand Rathi Wealth's Deputy CEO Feroze Azeez spoke to NDTV Profit, sharing his thoughts on the SEBI consultation papers.
As far as the direct impact for brokerages is concerned, especially due to cut in brokerage fees, Azeez offered a coy response. “Maybe, maybe not,” he said, reinforcing that it remains a consultation paper with "room for improvement."
