AMCs feeling good

Shares of listed asset management companies (AMCs) rallied sharply in early trade today, bucking the weak broader market after regulatory clarity from Sebi eased concerns around the mutual fund cost structure.

Nippon Life India Asset Management led the gains, rising nearly 7% to Rs.925.95, while HDFC Asset Management Company advanced about 5% to Rs.2,674.95. UTI Asset Management climbed close to 5% to Rs.1,165.45 and Aditya Birla Sun Life AMC gained around 4% to Rs.801 on the BSE.

The buying interest followed Sebi’s final notification on overhauling the mutual fund expense framework, which removed a key overhang that had weighed on AMC stocks since the draft proposals were released in late October.

While the regulator has reduced headline expense ratio caps and scrapped the additional 5 basis point charge that AMCs were allowed earlier, it has simultaneously excluded statutory levies such as STT, GST and stamp duty from the expense ratio, now redefined as the Base Expense Ratio (BER). This structural change is seen as improving transparency for investors without materially denting the economics of fund houses.

Market participants also took comfort from the fact that the cuts in brokerage and transaction cost caps were far less severe than initially feared, limiting the potential impact on distributor incentives and fund distribution momentum. With the final framework striking a balance between investor protection and industry viability, concerns around margin compression for AMCs appear to have eased meaningfully.

AMC and wealth management stocks had seen a sharp negative reaction after the draft regulations were unveiled on October 28, 2025, as markets had priced in a steeper hit to profitability. Today’s rally reflects a reassessment of those assumptions, with investors factoring in that the revised structure preserves operating stability while reinforcing long-term growth drivers such as rising retail participation, SIP inflows and financialisation of household savings.

The new rules will be notified in the current fiscal year and come into effect from April 1, 2026, keeping the sector in focus over the coming months.