AMC stocks surge up to 13% as SEBI defers rationalisaton of TER

Sebi chairperson Madhabi Puri Buch said that the regulator will soon come up with a second consultation paper around rationalising total expense ratio

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Shares of asset management companies (AMCs) surged in the early trade on June 30 after the marker regulator deferred its decision to rationalise the total expense ratio (TER), or the expenses that mutual fund (MF) schemes can charge their investors.

The Securities and Exchange Board of India (SEBI) was expected to redefine TER by bringing many charges within its limits, a proposal that had AMCs concerned. Analysts had expected a 20-30 percent drop in profits for AMCs if proposals were accepted by SEBI Board which met on June 28.

At around 9.50 am, UTI Asset Management was up nearly 7 percent to Rs 774.95, HDFC Asset Management 10 percent at Rs 2,265, Aditya Birla Sun Life AMC 6 percent at Rs 391 and Nippon Life Asset Management added nearly 13 percent to Rs 283 on BSE.

SEBI chairperson Madhabi Puri Buch said the regulator would soon come up with a second consultation paper on rationalising the TER.

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The board got feedback from the MF industry and more granular data that demonstrated that economies of scale have, in fact, been achieved to quite an extent, Buch said on June 28.

“The MF industry gave us data that over the last 5 years, economies of scale has been achieved. When we (Sebi) saw the granular data, we understand, therefore that our proposals need to undergo a change,” Buch said. SEBI takes its decision based on hardcore numbers and the proposals were based on an exercise undertaken earlier this year, she said.

Now that SEBI has more data, it will come out with a second consultation paper on TER soon. “The MF industry will be quite happy with our second set of proposals,” hinting that the new proposals would be less stringent than the earlier ones.

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