The rally on Thursday followed Sebi’s decision to introduce a base expense ratio that separates statutory levies such as GST from core fund management costs, while retaining the overall total expense ratio framework. The final rules, announced after the regulator’s board meeting, were widely viewed as far less punitive than feared and are set to take effect from April 1, 2026. Uncertainty around mutual fund fees has weighed on AMC stocks since 2023, triggering sharp corrections after Sebi’s October consultation paper.
Brokerages say the final framework delivers four clear positives for HDFC AMC: lower-than-expected cuts to total expense ratios, the exclusion of GST and statutory levies through the base expense ratio, brokerage caps that are materially higher than initially proposed, and greater flexibility for AMCs to share part of the impact with distributors.
“SEBI’s final expense caps for MFs offer some relief, vis-a-vis the proposal in Oct-25,” Jefferies said, estimating the net impact of the changes at 3–5 basis points of equity assets under management, with AMCs likely to share costs across the ecosystem.
Brokerage views: relief, not windfall
The key negative remains Sebi’s decision to remove the additional 5 basis points that AMCs could charge on schemes with exit loads. Prabhudas Lilladher described this as “negative for AMCs as 5bps would be directly reduced from equity TER,” but said the impact was partly passable and already reflected in stock prices after earlier corrections. The brokerage added that for large players such as HDFC AMC, “there is no material change in core earnings” following the Sebi changes.
Jefferies maintained a ‘Buy’ rating on HDFC AMC with a target price of Rs 6,620, implying about 30% upside from earlier levels, valuing the stock at 36 times December 2027 estimated earnings. “Risks include prolonged down-cycle in equity markets, inability to gain market share especially in equities, tepid NFO responses, and limited progress on style diversification,” the brokerage said.
JM Financial also struck a more constructive note, saying the impact of Sebi’s final rules was significantly lower than initially feared. “Net impact from change in slabs and carving out GST, and removal of exit load will be 2-3bps, this would result in a 2-4 hit to revenues and a 3-4 hit on FY27e PAT for HDFC AMC,” the brokerage said. “We expect the mutual funds to pass on some of the impact to the distributors, effectively resulting in an earnings cut of 2.” JM Financial rates the stock ‘Add’ with a 12-month target price of Rs 3,100.
Centrum Broking was more cautious, estimating that “if AMCs take no mitigating action, the estimated hit on FY27E PBT is expected to be around Rs 3.2 billion for HDFC AMC (7.7% of PBT),” though it noted that the reduced severity of TER cuts above higher asset thresholds should partly offset the pressure.
Pricing in the pain
AMC stocks had corrected 4–5% after Sebi’s October discussion paper, suggesting markets had already priced in a significant portion of the potential impact. “The 5bps impact seems to be priced in,” Prabhudas Lilladher said, noting that consensus estimates had already assumed a 50% pass-through to distributors.
JM Financial echoed that view, saying the final regulations were “considerate towards the mutual funds and the brokerages working with them,” with the impact on AMCs expected to be “very marginal.”
Strong operating base
The regulatory clarity comes at a time when HDFC AMC has been reporting steady operating performance. The company posted a 24% year-on-year increase in net profit to Rs 718 crore for the September quarter, while revenue from operations rose 16% to Rs 1,026 crore. Average assets under management climbed to Rs 8.81 lakh crore during the quarter, reflecting continued inflows and market appreciation.
The company has also taken shareholder-friendly steps, including approving its first-ever bonus issue in a 1:1 ratio and paying a final dividend of Rs 90 per share for the year ended March 31, 2025.
With Sebi’s long-awaited decision now in place and most of the regulatory risk already absorbed by markets, analysts say attention is shifting back to HDFC AMC’s ability to sustain equity market share, navigate market cycles and deliver earnings growth—without the shadow of sweeping fee cuts hanging over the sector.
Also read | HDFC AMC, Nippon Life, other AMC stocks rally up to 7% after Sebi’s mutual fund expense ratio rule changes
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
