Shares of leading capital-market and asset-management companies declined sharply today after SEBI issued a consultation paper proposing a revamp of mutual-fund fee structures. The proposal, aimed at tightening Total Expense Ratio (TER) limits and linking fund fees to investor outcomes, raised fears of margin pressure across the AMC sector.

Stocks down in the red - HDFC Asset Management Co., Nippon Life India, Motilal Oswal Financial Services, 360 ONE WAM,  Nuvama Wealth Management, Aditya Birla Sun Life AMC. The weakness dragged the Nifty Financial Services and AMC-linked indices down into the red since the opening bell.

According to SEBI’s paper, the regulator may:

• Impose tighter TER caps for both equity and debt schemes.
• Link management fees more closely with actual fund performance.
• Rationalise distributor commissions to curb over-incentivisation and potential mis-selling.

While these are good moves for strengthening investor protection and transparency, it could compress fee income for AMCs and wealth platforms that rely heavily on retail-commission networks. Firms with strong passive-fund, ETF, and institutional mandates, such as UTI AMC and HDFC AMC, may weather the changes better once clarity emerges.

For low-cost platforms like Groww, Zerodha, and NJ India Invest, this could prove to be a benefit as a rebalanced cost structure favours transparent, tech-enabled distribution. Brokerages with diversified revenue streams, including ICICI Securities and Axis Securities, are expected to be less affected.