Shares of listed mutual fund companies rallied sharply on Wednesday, with Canara Robeco Asset Management Company climbing nearly 7% and HDFC Asset Management Company and Nippon Life India Asset Management gaining between 4–6%, even as the broader market stayed subdued. The trigger was SEBI’s final decision on mutual fund expense ratios.
International brokerage house Jefferies sees it a “relief compared with the harsher proposals floated earlier, easing concerns that had been hanging over the sector for months.” According to leading domestic brokerage house Motilal Oswal, these are “unlikely to have a material impact on asset managers.”
AMC stocks had been under pressure since October, after SEBI’s discussion paper raised the possibility of deeper cuts to expense ratios and distributor commissions. The stock market’s reaction suggests investors were positioned for a tougher outcome.
MF expense ratio: What SEBI changed, and why markets have responded
At the centre of the issue is how much mutual fund companies are allowed to charge investors to run their schemes. SEBI’s final rules lower expense caps across categories, but Jefferies said the impact is meaningfully softer than what the market had been bracing for.
One key relief came on brokerage costs. According to Jefferies, SEBI capped brokerage for cash market transactions at 6 basis points, compared with an earlier proposal that would have pushed this down to as low as 2 basis points. For distributors and brokers, this matters because a deeper cut would have squeezed commissions sharply. For AMCs, it reduces the risk of having to absorb the full hit on their own margins.
Motilal Oswal Financial Services, in a separate sector note, also said SEBI’s revised regulations are better than what was proposed in the consultation paper and are unlikely to have a material impact on asset managers, brokers and distributors.
The brokerage said the regulator’s final framework, approved at SEBI’s board meeting in December, results in a lower earnings impact on AMCs than initially envisaged, especially after changes to brokerage caps and the treatment of statutory levies.
Jefferies on SEBI decision on MF expense ratio
In its December 17 report, Jefferies said the regulator’s final framework on total expense ratios (TERs) is “less damaging than feared”, particularly on brokerage limits and overall cost pressure for fund houses. The brokerage noted that while some cuts remain, the end result is far more balanced than the October discussion paper that had spooked investors.
That assessment was enough to spark buying across AMC stocks, which have been under pressure since SEBI first signalled tighter rules on costs. The rally stood out because benchmark indices were marginally lower during the session, pointing to a sector-specific move rather than a broader risk-on trade.
Overall, Jefferies estimates the net impact of the new TER framework at about 3–5 basis points of equity assets under management. That number is far lower than worst-case scenarios doing the rounds after the October proposal. The brokerage added that fund houses may also share part of this impact with distributors and other intermediaries, rather than taking the entire burden themselves.
Jefferies’ top AMC stock picks
Here is a look at some of top picks from Jefferies on the back of the news-
Jefferies on HDFC Asset Management Company: Buy
Jefferies has a Buy rating on HDFC Asset Management Company with a target price of Rs 6,620, implying an upside of about 30% from the price referenced in its report. The brokerage values the stock at 36x December 2027 estimated earnings, reflecting its confidence in HDFC AMC’s scale, profitability and return ratios compared with peers.
In its note, Jefferies said HDFC AMC remains well placed within the industry despite regulatory tightening, given its strong franchise, leadership in equity assets and consistently high return on equity. It added that the final SEBI decision on expense ratios reduces regulatory downside risks that had been weighing on the stock, though earnings remain sensitive to market cycles and equity inflows.
Jefferies on Nippon Life India Asset Management: Buy
Jefferies also maintains a Buy rating on Nippon Life India Asset Management, assigning a target price of Rs 1,020, which implies an upside of around 18%. The brokerage values the company at 32x December 2027 estimated earnings, factoring in its growing equity AUM base and improving profitability metrics.
According to Jefferies, Nippon Life India AMC stands to benefit from operating leverage as equity participation deepens, while the final SEBI TER framework eases concerns of a sharp margin hit. The brokerage flagged risks such as a sharp correction in equity markets and challenges in expanding equity market share, but said the regulatory outcome is more manageable than earlier proposals had suggested.