Motilal Oswal, HDFC AMC and other capital market shares in focus after latest SEBI changes

Shares of Motilal Oswal Financial Services Ltd., JM Financial Ltd., HDFC AMC Ltd., among other asset managers, broking names, and exchange stocks will be in focus on Thursday, December 18, after the latest announcement made by market regulator Securities and Exchange Board of India (SEBI) with regards to the Mutual Fund base expense ratio.

After the conclusion of its board meeting, SEBI announced that the expense ratio limit will now be called the Base Expense Ratio, which will exclude statutory levies, which comprise of STT / CTT, GST, Stamp Duty etc.

While brokerage charges are cut, the reduction is lower than the ones originally proposed.

SEBI has cut the Base Expense Ratio for Close-Ended equity schemes to 1% from 1.25% earlier, while that for index funds and ETFs, the BER has been cut to 0.9% from 1% earlier. The BER for Liquid-Scheme based fund of funds to 0.9%.

The brokerage cap on Mutual Fund cash trades has been kept at six basis points. SEBI has also approved removing the additional five basis points charged to mutual fund schemes with exit loads.

Brokerage paid by AMCs has been cut to six basis points for cash transactions and two basis points fot derivative deals.

Morgan Stanley believes that there could be a 3 to 3.5 basis points impact on large AMCs, of which 60% to 70% impact can be passed to distributors, resulting in a net impact of 1 to 1.5 basis points.

This 1.5 basis point impact could be 4% of HDFC AMC's operating profit and 3.4% of its profit before tax for financial year 2025, which could be mitigated through further pass throughs.

Jefferies believes that the new norms are a relief compared to the proposed norms in October. A cut in the cap on brokerages is also a relief for brokers. The brokerage said that the net impact of new changes will be between 3 to 5 basis points of equity AUMs and AMCs may compensate for that by sharing a part of it with the ecosystem.

The brokerage still sees this as a relief for AMCs, brokers and RTAs.

CLSA is of the view that the new regulations are broadly neutral for AMC earnings. A sensitivity analysis suggests a net Total Expense Ratio impact of a negative 2 basis points to positive 3 basis points across AMCs, depending on commission payouts, leaving profitability largely unchanged.

Shares of HDFC AMC are down 6% in the last one month, while those of Motilal Oswal have declined over 15% during the same period. JM Financial's shares are down 4% in a month as well.