Shares of asset management companies (AMCs) ended with sharp losses of up to 11.3% on Wednesday after markets regulator Sebi decided to slash the charges levied on investors by mutual funds.
The stock of Reliance Nippon Life AMC plunged 11.28% to close at Rs 190 on BSE. Intra-day, it plunged 13% to Rs 186.20 — its 52-week low. Shares of HDFC AMC tumbled Rs 131.65, or 8.55%, to close at Rs 1,408.55 on BSE.
Sebi in its board meeting on Tuesday had announced a reduction in the total expense ratio on mutual fund schemes by 25 basis points in the top slab.
CLSA, in a report, stated: “Market regulators (Sebi) lowered the fee-slabs for mutual funds and this could lead to a 15-25 bps reduction in equity fees; the change in debt fees is unlikely to have a material impact. This will impact all funds and should be effective in the coming 2-3 months.”
HDFC AMC had made a stellar debut on the bourses on August 6. The stock opened trading at Rs 1,726.25, 56% above its issue price of Rs 1,100 and ended the session at Rs 1,815.25, 65% above its issue price.
Morningstar India, in its note, stated that the introduction of new slabs with a lower TER limits will result in a reduction of overall TER of equity-oriented funds with assets greater than Rs 2,000 crore.
Funds with asset size of less than Rs 2,000 crore will continue to have a similar TER. “With increasing fund sizes, the quantum of reduction in TER increases. For instance, this move will result in a reduction of 9 bps in the TER of a fund with an AUM of Rs 5,000 crore, but a fund with an AUM of Rs 20,000 crore will witness a reduction of TER to the tune of 28 bps. This is exactly what Sebi is trying to achieve, to pass on the economies of scale of larger funds to investors,” said the note.