HDFC AMC, Nippon Life, Canara Robeco Surge as SEBI's 'Balanced' MF Framework Eases Earnings Concerns

On December 18, 2025, shares of leading Indian mutual fund companies saw a sharp recovery. Canara Robeco Asset Management Company surged nearly 10 per cent, while HDFC Asset Management Company and Nippon Life India Asset Management gained 5 per cent and 7 per cent, respectively. This sector-specific rally occurred even as broader market indices remained subdued. The rally followed SEBI's final decision on mutual fund expense ratio reforms, reversing the pessimism that had weighed on AMC stocks since October 2025.

The trigger for the gains was the market's recognition that SEBI's final rules, approved at the board meeting on December 16, 2025, were far more balanced and less punitive than earlier circulated proposals. Investors welcomed this relief, as it eased concerns that had depressed the sector for months.

The October Shock: When AMC Stocks Crashed

The significance of the December rally is best understood in the context of the October market reaction. On October 28, 2025, when SEBI released its consultation paper, AMC stocks fell sharply. HDFC AMC share price dropped 4.3 per cent, Nippon Life India AMC fell 5 per cent, and Canara Robeco AMC dipped 4.6 per cent. The Nifty Capital Markets Index fell 1.9 per cent, reflecting fears that SEBI's proposed reforms would significantly impact AMC’s earnings.

The December Twist: A 'Balanced' Approach Emerges

The December announcement marked a major recalibration. SEBI Chairman Tuhin Pandey stated that the board had “heard all sides” and adopted a “balanced version” of the rules. The final framework was significantly less radical than the October proposals, taking into account feedback and data presented by market participants.

This balanced approach was visible in three areas where the final rules were less stringent:

Key highlights of SEBI (Mutual Funds) Regulations, 2026

The capital markets regulator, in a press release issued on Wednesday, outlined the key highlights of the updated regulations.

Revised Expense Ratio Structure

A major change under the new framework is the overhaul of how expense ratios are calculated. Going forward, the Total Expense Ratio (TER) of a mutual fund scheme will be determined by adding the Base Expense Ratio (BER) to brokerage costs, along with applicable statutory and regulatory charges.

Important changes under the new structure:

• Expense ratio ceilings will now be referred to as the Base Expense Ratio (BER), which will not include statutory levies.
• Statutory and regulatory costs, such as STT/CTT, GST, stamp duty, SEBI and exchange fees, and similar trade-related charges, will be applied at actuals, over and above permitted brokerage slabs.
• TER will now be calculated as: BER + brokerage + regulatory charges + statutory levies.

Revised BER levels

The regulator has also specified the updated limits applicable to the Base Expense Ratio, detailed in the new framework.

Other Open-Ended Schemes – TER Structure

AUM-Based Expense Ratio: Equity vs. Non-Equity Schemes

(All figures represent total expense ratios. Current slabs include statutory levies; revised slabs exclude statutory levies.)

Close-Ended Schemes – TER Changes

Streamlining and restructuring

The new mutual fund regulations bring clearer and more consolidated rules. Eligibility norms for Mutual Fund and Mutual Fund Lite sponsors have been simplified, and the responsibilities of trustees and AMCs are now grouped under broader themes for easier interpretation. Provisions relating to prudential limits and valuation have also been reorganised for better consistency.

Revised brokerage framework

Brokerage caps have been rationalised across Service categories.

• Cash market trades: brokerage, which was earlier capped at 12 bps inclusive of levies (8.59 bps without levies), is now set at 6 bps excluding levies.
• Derivative trades: the previous limit of 5 bps inclusive (3.89 bps without levies) has been reduced to 2 bps excluding levies.

Removal of the extra expense allowance

The additional 5 bps charge earlier allowed for schemes with exit loads, temporarily, has been withdrawn.

Elimination of outdated provisions

Chapters on Real Estate Mutual Funds and Infrastructure Debt Fund schemes have been removed as separate frameworks for such products already exist.

As a result of the review of the mutual fund regulations, there has been a 44 per cent reduction in the size of the regulations from 162 pages to 88 pages.

“The word count has been reduced by approximately 54 per cent, from 67,000 words (including footnotes) in the current regulations to 31,000 words in the new draft. Further, the number of provisos has been reduced from 59 to fewer than 15 and all ‘notwithstanding’ clauses have been eliminated, except for their limited use under the ‘Repeal and savings’ provision. This restructuring is expected to improve readability and ease regulatory compliance,” SEBI said.

Conclusion: Modest Headwinds, Not Existential Threats

The strong gains in HDFC AMC, Nippon Life, and Canara Robeco on December 18, 2025, reflect the market reassessing SEBI’s mutual fund reforms positively. While the new framework introduces some cost pressure, it is small and manageable. The final rules have eased earnings concerns and restored confidence in the sector, driving the sector-specific rally.

Disclaimer: The article is for informational purposes only and not investment advice.