MF stocks soar as SEBI eases stand on expense ratio cut

Shares of asset managers rose after calming words on the overall expense ratio cut from market regulator SEBI after its board of directors meeting on Thursday.

SEBI has deferred its decision on the new mutual fund expense ratio regulations and will issue another advisory paper including comments from the industry.

Subsequently, shares of HDFC AMC and Nippon India increased by 12 per cent and 15 per cent to ₹ 2,296 and ₹ 288 while Aditya Birla Sun Life AMC and UTI jumped 1 per cent and 8 per cent to ₹ 373 and ₹ 785 a day. Friday.

SEBI Chairman Madabi Bore Boch said the regulator is convinced that the mutual fund industry has achieved the benefit of scale over the years. SEBI noted that data from the industry indicates that existing regulations have had success in passing on benefits of volume. “The microfinance industry will be very pleased with our second set of proposals,” she said.

Earlier, SEBI issued an advisory paper proposing to calculate TER including brokerage fees and GST on management fees at the asset management company level rather than at the scheme level. This approach was intended to provide a more comprehensive view of the expenses incurred by mutual funds.

‘Augurs okay for AMC stock’

While the final regulations’ shape remains to be seen, institutional Kotak said the improved prospects for less turbulent results bode well for AMC shares.

SEBI is also expected to address other issues raised by the industry, such as the treatment of arbitrage funds.

Even with the softening of the regulatory stance, there is some uncertainty around the new advisory paper and final regulations. Data-supported representation by various parts of the industry includes evidence of a 20 percent decline in value added exposure between 2018-22 due to economies of scale by the industry and the impact on profitability and growth of the industry following regulatory changes between 2009-13 and 2018-22.

Listed AMC has faced a combination of regulatory and market forces in recent years that have put pressure on earnings growth. As a result, valuations have fallen despite record stock flows and market levels.

Most of AMC’s stock is down 10-20 percent from last year’s peak levels even as Nifty stock is up 3-4 percent. This is despite AMCs’ equity assets rising 10 percent in the past six months.