(Reuters) -Shares of Indian asset managers fell as much as 8% on Wednesday, with analysts warning of a potential hit to profitability after the markets regulator proposed lowering the cap on brokerage fees, among other changes, seeking transparency in costs.
Motilal Oswal Financial Services led losses among pack with a 8% decline. Nippon Asset Management, dropped 6%.
Aditya Birla Sun Life AMC and HDFC Asset Management Company fell 5% and 4%, respectively.
Analysts at Jefferies said that the move could bring down profit before tax by about 30-33% for HFDC AMC and Nippon AMC in 2027.
The Securities and Exchange Board of India (SEBI) has proposed sharply lowering the cap on brokerage fees to 2 basis points from 12 bps for cash market transactions and to 1 bp from 5 bps for derivatives.
Typically, the brokerage’s expenses, including fees and transaction costs, among others, are deducted from the fund’s net asset value (NAV) and is referred to as the expense ratio. A reduction in fees will mean less money deducted under the expense ratio umbrella, freeing up assets for the investor.
A significant reduction in fees is likely to hit brokerages’ revenue, ICICI Direct said in a note.
Jefferies added that these rules could also hurt institutional brokers such 360 One Wam and Nuvama, which are down about 4.3% and 2.9%, respectively.
Among banks, Kotak Mahindra could be hit due to higher brokerage-linked revenue, Jefferies said.
(Reporting by Urvi Dugar in Bengaluru; Editing by Janane Venkatraman)
