The Securities and Exchange Board of India (SEBI) on Wednesday decided to make a major change to a long-standing rule regarding mutual fund expenses. SEBI announced a reduction in mutual fund expense ratios to increase retail investor participation. Following this announcement, shares of various Asset Management Companies (AMCs) across the country have surged since Thursday morning.
On Thursday, HDFC AMC's share price increased by 4.50%. After market opening, Aditya Birla Sun Life Asset Management Company's share price rose by 2.50%. Canara Robeco AMC's share price increased by more than 6%. Additionally, several other companies' share prices also witnessed significant growth.
According to SEBI's official statement, under the new expense structure for mutual funds, all mandatory statutory expenses will be kept outside the 'Base Expense Ratio' or BER. This includes GST, stamp duty, SEBI fees, exchange fees, and other regulatory charges. This means the total expense ratio will not be calculated by adding these expenses to the BER.
As a result of this decision, expenses will be reduced for multiple mutual fund schemes. SEBI has announced that expense ratios have been reduced for index funds, Exchange Traded Funds (ETFs), Fund of Funds (FoF), equity-oriented schemes investing more than 65% of assets in equity, other FoFs, closed-ended schemes, and non-equity-oriented schemes.
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Following this announcement, shares of various Asset Management Companies (AMCs) across the country are showing increased momentum. According to market analysts, this change could be positive for the business of asset management companies.
In this regard, SEBI-registered fundamental equity analyst Avinash Gorakshakar said that with SEBI's decision, asset management companies will have more money in hand, which they can use for their business and investment management work. Additionally, when expense ratios decrease, investors get a higher Net Asset Value or NAV. As a result, more people will be interested in investing in mutual funds.
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According to him, new investments and increased investment flows will increase the total Assets Under Management (AUM) of various AMCs. At the same time, there is a possibility of customer numbers increasing as well. Experts believe this market expectation is currently one of the main reasons for the rise in AMC share prices.
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