At 10:12 am, shares of Reliance Nippon Life Asset Management was trading 8 points lower at Rs 197 apiece on BSE. HDFC Asset Management Company was also down 8 per cent at Rs 1,417.80.
Analysts say though the move was expected, the magnituide of the cut in TER came in as a surprise. Subramanian Iyer, an analyst tracking the sector at Morgan Stanley expects these changes to take effect from FY20. As regards HDFC AMC, Morgan Stanley has cut estimates for equity and overall gross revenue / AAAUM by around 20 basis points (bp) and around 11bp, respectively.
"Following this large front-loaded TER cut, the overhang of adverse regulation should subside for a long period. Further, both long-term growth prospects and investor perception could get a fillip from lower costs for investors and improved transparency, he says in a report.
Adding: "After some pass-through to distributors (which is the key variable), we cut our PBT / AAUM forecast by ~6bp, our EPS forecasts by 13-14 per cent and our price target by 14 per cent to Rs 1,765. The stock has been weak in anticipation of adverse regulation, and we expect some further near-term weakness."