Why AMC Shares Jumped Despite SEBI’s TER Changes: What the Final Rules Mean?

Mumbai | December 18, 2025

Shares of asset management companies and wealth managers rallied strongly on Thursday after the Securities and Exchange Board of India (SEBI) unveiled its final framework for mutual fund expense ratios, calming fears of a sharp hit to industry margins.

Stocks such as Nippon Life India AMC, HDFC AMC, UTI AMC and Aditya Birla Sun Life AMC rose between 3% and 7%, while wealth and market infrastructure players including Nuvama, CAMS, KFin Technologies, NSE and Motilal Oswal also traded higher. Recently listed Canara Robeco AMC surged over 8%, reflecting broad-based relief across the capital markets ecosystem.

Why AMC Stocks Reacted Positively

The rally followed SEBI’s decision to moderate the scale of fee reductions compared with its October 2025 consultation paper, which had sparked concerns of a deep and lasting earnings impact.

While SEBI has tightened the expense framework to improve transparency for investors, the final rules were seen as more balanced than expected. Market participants welcomed three key changes that softened the overall impact on AMCs.

Key Changes in SEBI’s Final TER Framework

1. Base Expense Ratio Replaces TER

SEBI has introduced a Base Expense Ratio (BER), under which statutory levies such as GST, stamp duty, STT, CTT and other taxes will be excluded from fund expenses. These costs will now be disclosed separately instead of being absorbed within the TER.

This change is seen as particularly beneficial for larger AMCs, as it offsets part of the pressure from lower headline expense caps.

2. TER Cuts Less Severe Than Feared

For equity-oriented schemes, the maximum expense ratio for funds with assets below ₹500 crore has been reduced to 2.10%, from 2.25% earlier. For schemes managing over ₹50,000 crore, the cap now stands at 0.95%.

Debt schemes saw a similar moderation, with expense caps ranging between 0.70% and 1.85% based on AUM size.

Overall, revision is less disruptive than markets feared earlier.

3. Brokerage Caps Reset Closer to Industry Reality

SEBI lowered brokerage caps for AMCs to 6 basis points for cash market transactions and 2 basis points for derivatives. While lower than current levels, these are meaningfully higher than the sharp cuts proposed earlier, which had raised fears of severe revenue compression for brokers and distributors.

Average transaction costs for fund managers are expected to decline by around 10–15 basis points, improving cost efficiency without materially disrupting the distribution ecosystem.

Market Reaction: Relief Rally Takes Hold

Today, the Nifty Capital Markets index was trading nearly 2% higher. Nippon Life India AMC and HDFC AMC rose around 6% and 4.5%, respectively, while UTI AMC and Aditya Birla Sun Life AMC gained up to 4%.

Wealth managers and capital market intermediaries also benefited, as the brokerage caps proved less disruptive than feared. The market reaction suggests that a large part of the negative impact had already been priced in following the October discussion paper.

What This Means for AMC Earnings

The removal of GST from the base expense structure provides a meaningful offset to lower TER ceilings. While SEBI has withdrawn the additional 5-basis-point allowance on exit loads, the net earnings impact for large AMCs is now expected to be modest.

Mid-sized and smaller AMCs, particularly those with higher distributor payouts, may see a slightly more mixed impact, but overall profitability concerns appear less severe than earlier anticipated.

PL Capital View

The final framework reduces expense ratios by around 10bps, compared with the 15bps cut proposed earlier, mainly due to GST being excluded from base expenses. For large AMCs, this change is broadly earnings-neutral, as the GST exclusion offsets part of the fee reduction. Smaller AMCs could see a marginal positive impact, given relatively higher operating leverage. Overall, PL Capital does not see any material change to core earnings for the AMC universe.

Going forward, market attention is likely to shift back to AUM growth trends, SIP flows and market-linked earnings momentum, rather than regulatory risk.

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