Nippon Life, HDFC AMC, UTI, ABSL AMC shares rally up to 7% today; here's why

Shares of asset managers such as Nippon Life India Asset Management Ltd, HDFC Asset Management Company Ltd (HDFC AMC), UTI AMC and Aditya Birla Sun Life AMC Ltd rose as much as 7 per cent in Thursday’s trade after the Securities and Exchange Board of India announced reforms to the total expense ratio (TER) framework.

Analysts said the changes improved transparency, as the benefit of exit loads had been withdrawn, and were viewed as positive for long-term investor trust. They added that the revised TER structure also protected the broader mutual fund ecosystem by ensuring a more equitable distribution of costs and incentives.

"We believe that while making the charges more transparent for customers, the approved changes also protect the mutual fund ecosystem, which has generated wealth for retail customers and enhanced financial inclusion. The separation of levies while changing the TER structure should counter the impact from removal of exit load, while the cut in brokerages is much lower than initially proposed. We expect the impact on AMCs, distributors and brokers to be very marginal," JM Financial said.

Centrum Broking said the reduction in brokerage costs is expected to be largely neutral for AMCs, as the actual impact is likely to be much lower than indicated in the consultation paper. 

The proposals will be notified in this fiscal, and will come into effect from April 1, 2026.

Nippon Life India Asset Management Ltd led the gainers, climbing 7.06 per cent to Rs 925.95. HDFC Asset Management Company Ltd surged 5.26 per cent to Rs 2,674.95. Aditya Birla Sun Life AMC Ltd gained 3.7 per cent to Rs 801 apiece. UTI AMC jumped 3 per cent to Rs 1,147.40 apiece. 

To be sure, SEBI has changed the way mutual fund expenses are calculated by introducing a Base Expense Ratio (BER) and separating taxes and regulatory charges from fund expenses. 

Under the new system, the Total Expense Ratio (TER) will clearly show three parts: the base expense (BER) charged by the fund, brokerage costs, and statutory or regulatory levies. 

Charges such as STT or CTT, GST, stamp duty, SEBI fees and exchange fees, which are now charged to the scheme on an actual basis over and above BER. 

Change in TER regime does not cut revenues for the mutual funds, JM insisted. 

"BER is below the TERs by 15bps on equity and hybrid schemes with an AUM of less than Rs 2,000 crore (except for AUM of Rs 500 crore to Rs 750 crore) and by 10bps for larger schemes. For schemes with an AUM more than Rs 2,000 crore, the final BER is 5bps above that proposed in the October draft," JM said.

Earlier, GST on commissions to agents and other statutory levies were paid out of the TER. Looking at scheme P&L statements, we estimate that the removal of GST would give a benefit of 12-13 basis points to the larger AMC.

"With a 10bps cut in slab, this will benefit the AMCs by 2-3bps. This would offset the adverse impact due to removal of exit load. For debt and other schemes, mutual funds generally operated below the TER limits, so, we do not see any impact on those schemes," JM said.