HDFC AMC, Canara Robeco, Nippon Life Share Price: Asset Management Stocks Rally After Sebi Revises Expense Ratio Norms

Stocks of asset management companies (AMCs) rallied up to 9.65 per cent on December 18 after market regulator Securities and Exchange Board of India (Sebi) amended expense ratio framework at its board meeting held on December 17.

Canara Robeco AMC's shares jumped up to 9.65 per cent to Rs 313.90 apiece, Nippon Life India rallied up to 7.11 per cent to Rs 926.60 per share, HDFC AMC surged up to 5.77 per cent to Rs 2,688 per share, and Motilal Oswal Financial Services advanced up to 3.88 per cent to Rs 866.25 apiece. Other asset and wealth manager stocks such as Nuvama Wealth Management, UTI AMC, and Aditya Birla Sun Life AMC also traded in the green.

Nifty Capital Market index, which tracks 15 such stocks from the industry, also rallied up to 2.40 per cent in the morning trade.

What Changes Did Sebi Made In Expense Ratio Framework

After nearly three decades, Sebi replaced the Mutual Fund Regulations 1996 with the Sebi (Mutual Funds) Regulations, 2026. Under the new framework, expense ratio limits have been rechristened as the Base Expense Ratio (BER), which will exclude all statutory charges.

Statutory charges such as securities transaction tax (STT), commodity transaction tax (CTT), goods and services tax (GST), stamp duty, Sebi and exchange fees incurred after executing trades will be charged on an actuals basis, over and above the permissible brokerage limits. As a result, the Total Expense Ratio (TER) will effectively be the sum of the BER, brokerage, and all applicable regulatory and statutory levies.

Sebi Lowers Base Expense Ratio Limits

Following the amendments, BER for index funds and exchange traded funds (ETFs), and fund of funds (FoFs) investing in liquid schemes, index funds or ETFs have been lowered to 0.90 per cent from 1 per cent. The regulator capped the BER for FoFs investing more than 65 per cent of assets in equity-oriented schemes at 2.10 per cent, down from 2.25 per cent, and has set the limit for other FoFs at 1.85 per cent against 2 per cent earlier.

For other open-ended schemes, Sebi retained an assets under management (AUM)-linked slab structure. It capped the BER for equity-oriented schemes with assets of up to Rs 500 crore at 2.10 per cent, as against 2.25 per cent earlier, and fixed the limit for non-equity schemes in the same slab at 1.85 per cent, down from 2 per cent. The regulator progressively reduced the limits for higher AUM slabs, with equity-oriented schemes managing more than Rs 50,000 crore capped at 0.95 per cent and non-equity schemes at 0.70 per cent.

For close-ended schemes, the watchdog reduced the BER for equity-oriented funds to 1 per cent from 1.25 per cent and lowered the cap for other close-ended schemes to 0.80 per cent from 1 per cent.

Sebi said it has set higher BER thresholds for equity-oriented schemes with AUM of Rs 2,000 crore and above than those proposed in the October 28, 2025 consultation paper, to largely offset the impact on asset management companies from excluding statutory levies from the base expense ratio.

Why AMC Stocks Rose Despite Reduction In BER Limits

AMC stocks rose even as Sebi reduced BER limits, as the market had largely priced in the impact much earlier. Investors had already factored in the potential margin pressure when Sebi released its consultation paper on the proposed changes in October this year. This had triggered a sharp sell-off in AMC stocks at the time.

Against those expectations, the final framework on BER limits is being viewed as less severe than initially feared. This led to a recovery rally in AMC stocks.

How Will The New Framework Impact AMCs' Profitability

Swapnil Aggarwal, Director, VSRK Capital, told Outlook Money, "India’s asset management industry may face near-term margin pressure as greater fee transparency forces fund houses to absorb costs earlier recovered through expense ratios or share the impact with distributors. Smaller AMCs could feel the strain more acutely. However, over the medium to long term, clearer pricing and competitive fee structures are likely to build investor trust, widen participation, and accelerate asset growth, helping offset margin compression and strengthening the industry’s long-term fundamentals."