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Shares of asset management companies and brokerage firms traded higher in early deals on Thursday, December 18, after the Securities and Exchange Board of India (Sebi) announced changes to mutual fund expense rules and brokerage caps, easing investor concerns triggered by earlier proposals.

Stocks such as HDFC Asset Management Company, UTI AMC and Nippon Life India Asset Management gained, while brokerage firms including Angel One, Nuvama Wealth Management and Motilal Oswal Financial Services also traded in the green.

The Sebi board on Wednesday approved tweaks to the mutual fund expense framework by introducing a base expense ratio, or BER. The BER will exclude statutory levies such as security transaction tax and GST. This marks a shift from the current system that focuses mainly on the total expense ratio, or TER.

Sebi clarified that the TER will continue to apply and will be the sum of the BER, brokerage, regulatory levies and statutory levies.

Sebi chairman Tuhin Kanta Pandey said taxes and levies change from time to time, making BER a better measure of expenses charged by the industry. He added that the regulator chose a “balanced” set of rules instead of the more “radical” proposals outlined in the recent discussion paper, which had unsettled investors.

For brokerage firms, Sebi rationalised brokerage limits. The cash market brokerage cap was cut from 0.12 per cent to 0.06 per cent. For derivative transactions, the cap was reduced from 0.05 per cent to 0.02 per cent.

This was seen as positive for the sector, as the October proposal had suggested steeper cuts. Sebi has also removed an additional 0.05 per cent exit load that was introduced in 2018. The new rules will come into effect from April 1 next year.

The board also approved an overhaul of stockbroking regulations that are over three decades old, aimed at improving clarity and transparency.

At the time of writing, HDFC AMC was trading over 5 per cent higher at Rs 2,676.20 on the NSE. Nippon Life India AMC was up nearly 4 per cent at around Rs 900 and touched an intraday high of Rs 926, a gain of about 7 per cent. UTI AMC rose about 2.4 per cent to Rs 1,140 and hit an intraday high of Rs 1,169, up around 4 per cent.

CLSA said Sebi’s final Mutual Fund Regulation 2026 appears broadly neutral for AMC earnings. While BER limits were trimmed by about 10 basis points and the additional 5 basis point allowance for exit loads was removed, the overall impact on profitability is likely to be limited.

CLSA’s sensitivity analysis suggests a net TER impact of minus 2 to plus 3 basis points across AMCs, depending on commission payouts, leaving earnings largely unchanged.

Jefferies said the final expense caps offer relief compared with the October proposals. It noted that the cut in brokerage caps to 6 basis points, net of taxes, is significantly better than the earlier proposal of 2 basis points and should benefit brokers. Jefferies estimates the net impact of the changes at around 3 to 5 basis points of equity AUM, which AMCs may partly offset by sharing costs within the ecosystem.

Morgan Stanley said the final expense ratio slabs are modestly better than the draft proposal and could limit the impact on large AMCs like HDFC AMC to around 1 to 1.5 basis points, much of which could be passed on to distributors.