The brokerage said the proposals, which touch on three key areas — exit load charges, brokerage fees, and total expense ratio (TER) — could together dent profitability at top AMCs such as HDFC AMC and Nippon Life India AMC by as much as 8–10% from FY27, if implemented as drafted.
One of the most significant proposals is the removal of the additional 5 basis points (bps) charge that mutual funds can currently levy on schemes with exit loads. Jefferies estimated that doing away with this charge could directly hit AMC earnings by 8–10%. “Mutual funds are likely to seek a balancing act on this, but if the cut must be absorbed, 60–70% of the impact may be shared with distributors and other ecosystem players,” it said in a note dated October 29.
Sebi has also proposed slashing the ceiling on brokerage and transaction charges from 12 bps to 2 bps for cash market trades and from 5 bps to 1 bp for derivatives. The move aims to align equity schemes with arbitrage funds, which typically pay 1.18–1.34 bps in brokerage. Jefferies warned this could hurt institutional brokers such as 360 ONE and Nuvama, and, to a lesser extent, AMCs. Among banks, Kotak Mahindra Bank could see a bigger impact given its higher contribution from brokerage revenues.
Meanwhile, Sebi’s plan to reduce TER by roughly 15 bps while allowing statutory levies such as GST and STT to be charged separately may prove neutral for the industry, Jefferies said. The brokerage noted that this would allow funds to pass on future changes in statutory costs directly to investors. The consultation paper also proposes operational changes, including revised disclosure norms for TER, differential expense ratios based on fund performance, and clearer segregation of non-pooled businesses.
Jefferies expects the mutual fund industry to lobby Sebi for a “balancing act” before the November 17 feedback deadline, as the proposed changes, while investor-friendly, could substantially compress margins across the AMC ecosystem.Also read: Sunil Singhania’s Rs 2,700 crore-portfolio gets new look; adds 6 new stocks in Q2. Do you own any?The market regulator, Sebi, on Tuesday proposed a major revamp of the mutual fund fee framework, introducing key changes to how fund houses levy charges on investors. The move aims to simplify regulations, enhance transparency, and lower overall costs for unit holders. At a broader level, Sebi has proposed changes for simplification and clarity, transparency and investor protection, ease of compliance, major changes to the section on ‘definitions, and deletion of redundant/replicative chapters/clauses.
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