Dalal Street Shaken As SEBI’s Mutual Fund Shake-Up Jolts AMC Stocks
It was a tense morning on Dalal Street as the usually steady asset management counters took a sharp turn south. Capital market and AMC stocks came under heavy selling pressure after SEBI dropped a regulatory bombshell, a new consultation paper proposing sweeping changes to mutual fund regulations.
Investors watched in disbelief as marquee names like HDFC AMC and Nippon Life India Asset Management tumbled over 4%, while Nuvama Wealth Management and Aditya Birla Sun Life AMC weren’t spared either, slipping more than 3%. The sudden sell-off reflected rising jitters over potential earnings hits and tighter cost structures.
With SEBI’s new rulebook hinting at lower expense ratios and reduced brokerage costs, the Street is abuzz with one question, will this transparency drive turn into a profit squeeze for fund houses, or is it a long-overdue clean-up act for India’s ₹58 lakh crore mutual fund industry?
SEBI’s Proposal: Transparency, Cost Reduction, And New TER Structure
- Focus on Transparency: SEBI aims to bring more clarity and fairness to how mutual funds are charged.
- Lower Brokerage Costs: Proposed cap of 2 basis points (bps) for cash market trades, sharply reduced from the current 12 bps.
- Derivatives Cap Cut: For derivative transactions, brokerage would drop to 1 bps, down from 5 bps.
- Rationalising Expenses: The proposals are designed to reduce overall fund costs for investors.
- Enhanced Disclosure: SEBI seeks greater transparency in how fund houses report and manage expenses.
- Impact: While good news for investors, these changes could tighten margins for asset management companies (AMCs).
Market Reaction: AMC And Broking Stocks Tumble
Reacting to the proposals, shares of major capital market firms saw sharp declines:
- Nuvama Wealth Management fell up to 9% to ₹6,760.50
- Motilal Oswal Financial Services declined 5.5% to ₹1,030.90
- IIFL Capital Services dropped 9% to ₹335.05
Among AMCs, HDFC AMC slipped over 6% to ₹5,288, Nippon Life India AMC fell 2.7% to ₹880.30, and UTI AMC declined 2.2% to ₹1,274.20.
End Of The Additional 5 bps Expense For AMCs
SEBI has proposed scrapping the extra 5 basis points (bps) expense that AMCs have been charging on assets under management since 2018.
To offset this change, the regulator plans to raise the base Total Expense Ratio (TER) by 5 bps for open-ended active mutual fund schemes.
New Proposals: Clarity On TER And Statutory Charges
- SEBI has proposed that the Total Expense Ratio (TER) should exclude statutory levies such as STT, GST, CTT, and stamp duty.
- This change ensures that any future revision in these levies directly benefits investors.
- A new performance-linked TER mechanism has been proposed, which would be voluntary for AMCs.
- The detailed framework for this will be finalized after consultation with stakeholders.
- SEBI has invited public comments on these proposals until November 17.
(With Inputs)
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Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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