Asset Management Companies (AMCs) shares surged in the early trade after the market regulator deferred its choice to rationalise the total expense ratio (TER) or the outlays that mutual fund (MF) schemes can charge their investors.

The Securities and Exchange Board of India (SEBI) was anticipated to redefine TER by fetching many charges within its limits, a proposal that had AMCs concerned. Analysts had anticipated a 20-30% drop in profits for AMCs if proposals were acknowledged by SEBI Board which met.

At 9:50 am, UTI Asset Management was up 7% to Rs 774.95, HDFC Asset Management 10% at Rs 2,265, Aditya Birla Sun Life AMC 6% at Rs 391 and Nippon Life Asset Management added nearly 13% to Rs 283 on BSE.
The board got feedback from the MF industry and more coarse data that verified that economies of scale had been achieved to an extent.

“The MF industry reveals data over the last 5 years, economies of scale have been accomplished. When SEBI saw the granular data, the understood proposals need to change,” Buch said. She said SEBI takes its conclusion based on dedicated numbers, and the proposals were based on an exercise commenced earlier this year.

Now that SEBI holds data, it will come out with a second discussion paper on TER soon. “The MF industry will turn happy with the second set of proposals,” hinting that the new proposals would be less strict than the earlier ones.