The capital market regulator SEBI’s move to cut expense ratios of asset management companies (AMCs) will have minimal impact on the mutual fund industry as it prepares to rework its costs before the new norms come into force from April 1, 2026.
However, the reduction in brokerage charges for equity cash and derivatives transaction will impact the broking firms. SEBI has reduced the brokerage cap on cash market transactions to 0.06 per cent from 0.09 per cent and on derivatives trading, it was cut to 0.02 per cent ( 0.04 per cent).
Shares of both broking and MF firms saw a mixed show on Wednesday. While Angel One was down 1 per cent at ₹2,480 and Anand Rathi Shares and Stock Broking was up 2 per cent at ₹583. HDFC AMC and Nippon India AMC shares were up 7 per cent and 5 per cent at ₹2,724 and ₹912.
DP Singh, Deputy Managing Director, SBI Funds Management, said the reduction in TER will have a marginal impact on AMCs. Statutory levies are kept outside overall expenses.
The impact of cut in brokerage charges can be worked with volumes going up on the back of steady inflow and it will take another three-four months to implement, he added.
SEBI has also withdrawn the additional 0.05 per cent expense that schemes with exit loads were allowed to charge since 2018.
Brokerage cap
Gaurav Jani, VP and Equity Research Analyst, PL Capital, said while the final brokerage caps are less severe than initially proposed, brokers may still see some impact on revenues. The removal of this additional charge is negative for asset managers from a revenue standpoint, but much of the impact appears to be already priced in, as mutual fund stocks had corrected after SEBI released its discussion paper earlier, he said.
Instead of a sharper 15-basis point reduction suggested earlier, the final framework provides for a 10-basis point adjustment, said Jani. The softer approach is likely to be neutral for large asset managers and could even be marginally positive for smaller fund houses, while still protecting investor interests, he added.
SEBI has also created Base Expense Ratio, which tracks the core fund expenses from statutory levies, making the cost structure easier to understand and monitor for investors.
Niharika Tripathi, Head of Products and Research at Wealthy.in, said the revised expense framework is best viewed as a tool for clearer and more consistent cost monitoring over time, rather than an invitation to churn portfolios.
Investors are generally better served by staying invested in funds that continue to meet their objectives, while using improved cost disclosures to track expenses and reassess only when there is a broader reason to do so, she added.