Shares of major asset management companies (AMCs) rose up to 5 per cent on Tuesday—in an otherwise lacklustre day of trading—as the regulatory approval for the new asset class was seen as opening up a new revenue stream for mutual funds (MFs).
Nippon Life India AMC gained 5.2 per cent on the BSE, while Aditya Birla Sun Life AMC ended the session 4.4 per cent higher. HDFC AMC went up 1.6 per cent.
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The board of the Securities and Exchange Board of India (Sebi) on Monday approved the introduction of new investment products under the MF framework.
“We appreciate the overall healthy delivery by the industry, which in turn is attracting more flows, and expect the overall yields to remain healthy in the medium term. We believe that the addition of the new asset class aimed at HNIs will be well received and will provide additional scope to expand the industry,” said Jignesh Shial, director – research, head of BFSI sector at InCred Capital.
This new product lineup is seen as emerging as a major competitor to portfolio management services (PMS) and alternative investment funds (AIFs). Under the new framework, MFs can launch products similar to those being offered by PMS and AIF but with a lower ticket size of Rs 10 lakh.
The MF offering is also expected to gain a tax edge over PMS and AIF.
“The minimum investment of Rs 10 lakh, while higher than most mutual funds, is significantly lower than the Rs 50 lakh required for PMS. This could potentially open up newer investment strategies and a different point on the risk-return scale to a broader range of investors,” said Dhirendra Kumar, CEO of Value Research.
“The new investment product bridges the gap between MFs and PMS, given the lower ticket size of Rs 10 lakh. It also has several advantages over PMS and AIF, like better tax efficiency and the scope to offer differentiated products. Considering these factors, the new MF product segment is likely to achieve scale with time. This should add to AUMs and revenues of fund houses,” said Sunil Subramaniam, a market expert and former senior MF executive.
The new product lineup is expected to witness strong traction from AMCs, with several of them already firming up their plans for the newly introduced segment. The largest fund house, SBI MF, is one of them.
“We are looking at the option. The final regulation will likely come out in 2-3 months. Fund houses will be able to approach for product approvals then. Overall, it’s a positive for the industry. It can lead to higher volumes and add to the assets under management,” said D P Singh, deputy MD & joint CEO, SBI Mutual Fund.
Shares of AMCs have risen significantly in the last year amid soaring profits and strong inflow projections. Since October 2023, HDFC AMC is up 65 per cent. Shares of Nippon Life India AMC have more than doubled during the period.
First Published: Oct 01 2024 | 7:22 PM IST
