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Zee Business Managing Editor Anil Singhvi has shared his analysis on SEBI’s new consultation paper proposing major changes in mutual fund (MF) regulations. The proposals aim to bring more transparency and reduce expenses for investors, but they could negatively impact large AMCs and brokerage firms.

SEBI has suggested that brokerage costs such as GST, STT, CTT, and stamp duty will no longer be included in the Total Expense Ratio (TER). Asset management companies (AMCs) will also be required to provide a clear cost break-up.

Further, cash brokerage rates have been proposed to be reduced from 12 bps to a maximum of 2 bps, and derivatives brokerage from 5 bps to 1 bps.

AMCs will be allowed to charge a higher TER only if they outperform their benchmark, and the extra 5 bps charge from exit load will be removed. Additionally, SEBI has directed AMCs to segregate their non-MF businesses, such as PMS and advisory services, from mutual fund operations.

According to Singhvi, SEBI’s intent is clear — to reduce expense ratios and increase transparency in the mutual fund industry. However, the impact will not be uniform across the sector.

He said the proposals could hurt large and old mutual funds, as they may face margin pressure due to lower permissible costs. On the other hand, newer fund houses may benefit as the proposals could make competition easier by creating a level playing field.

Brokerage companies dealing with mutual fund transactions are expected to face the biggest negative impact, as their commission income could see a sharp reduction. Singhvi noted that foreign brokerage firms might be hit even harder due to their dependency on institutional MF deals.

Overall, Singhvi cautioned that the proposed norms could trigger short-term weakness in mutual fund and capital market-related stocks, as investors weigh the impact of lower revenue streams and tighter cost structures.

Morgan Stanley on HDFC AMC: The brokerage maintained an equalweight rating with a target of Rs 5,400. It said SEBI’s move to reintroduce rationalization of TER will depend on industry feedback. Some offset may come from the passthrough of statutory levies to customers and distributors.

Jefferies on AMCs: Jefferies highlighted that SEBI’s consultation paper poses a risk to earnings. A 5 bps cut in equity exit loads could impact FY27 PBT for HDFC AMC and Nippon AMC by 30–33 per cent. The reduction in cash market brokerage fees from 12 bps to 2 bps aims to align equity schemes with arbitrage funds.

If implemented, the move could be negative for institutional brokers such as 360 ONE and Nuvama. Jefferies added that lowering TER as statutory charges get levied separately may be neutral to overall earnings

Abhay Shukla is a Senior Sub-Editor at Zee Business, where he covers the stock markets, corporate news, personal finance, technology, and auto sectors.

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