Today morning, in an otherwise recouped market, the stock price of asset management companies (AMCs) have come tumbling down. Reliance Nippon Life AMC is the top loser on the BSE, going down to hit a new low at Rs.192.10; its IPO price was Rs.252. HDFC AMC also hit a new low at Rs.1397 though it remains well above the IPO price of Rs.1100.
Yesterday evening, SEBI announced a cap on the total expense ratio (TER) for for equity-oriented mutual fund schemes (close-ended and interval schemes) at 1.25% and for other schemes at 1%. The TER cap for fund of funds will be 2.25% for equity-oriented schemes and 2% for other schemes. TER cut is in addition to the recent 15 bps cut in lieu of exit loads. Sebi said all mutual fund commissions and expenses must be paid from the scheme itself.
This is expected to have an impact on the earnings of AMCs though bigger AMCs could see a reduced impact due to economies of scale. Brokerage houses across the board have cut the target price for the listed AMCs.