AMCs are expected to see a sharp sequential decline in equity AUMs for Q4 due to market corrections, with mid- and small-cap-focused schemes hit the hardest.
Asset management companies (AMCs) are likely to see a sharp decline in their equity AUMs on a sequential basis for the quarter ended March amid the ongoing correction. Further, the players with a higher concentration in the mid-cap and small-cap segments will see a steeper decline, as the broader markets bore the brunt of the selling during the downturn.
Domestic brokerage InCred Equities shared that HDFC AMC has held up better than peers. On the flip side, Nippon Asset Management (NAM) and UTI AMC have a higher concentration in SMIDs, and therefore, will report a higher decline in equity AUM.
“The decline since December 2024 has seen a diverse trend among AMCs, with HDFC AMC relatively holding up (-12 percent return since December 16, 2024) and Nippon Life India AMC (NAM AMC) showing a sharper fall (-29 percent fall since December 16, 2024).”
This diverse movement is largely attributable to the higher contribution of small-cap and mid-cap
schemes at ~17 percent of the total AUM for NAM AMC and ~14 percent of the total AUM for HDFC AMC.
Nuvama Institutional Equities stated that given the steep correction in small and mid-cap stock prices, the brokerage reckon steep QoQ declines in closing AUMs of NAM/UTIAM of 6.5 percent and six percent, respectively.
A steep decline in AUMs shall benefit asset managers with a lower proportion of assets in schemes above Rs 50,000 crore in size. HDFC AMC and NAM have 51.6 percent and 23.3 percent of assets in such schemes while UTI AMC and Aditya Birla Sun Life AMC’s exposure is nil,” added Nuvama.
Outlook
InCred Equities expects mutual funds equity scheme inflow to remain volatile in the near-term; however, the brokerage sees this as an opportunity for players with a strong vintage and high performance to outshine other newer players.
“Among listed AMCs, we observed that HDFC AMC and NAM AMC consistently have been among the top five performers in large-cap and mid-cap schemes when it came to three-year returns, over the last one year,” stated the brokerage. It added that Aditya Birla Sun Life AMC has been gradually improving its performance in the case of near-term returns of its various schemes.
InCred Equities has altered the target prices and rating on a series of AMC players. Here is what the brokerage said on the AMCs under its review:
- We believe the correction in NAM AMC is overplayed and reiterate ‘add’; rating on it with a revised target price of Rs 780 (Rs 900 earlier).
- We upgrade HDFC AMC to ‘add’ (from ‘hold’) with a revised TP of Rs 4,600 (Rs 4,200 earlier), as we believe it will be one of the key beneficiaries of the volatility.
- We also like ABSL AMC and maintain ‘add’ rating on it with a revised target price of Rs 800 (Rs 850 earlier).
- We have an ‘add’ rating on UTI AMC with a revised target price of Rs 1,250 (Rs 1,350 earlier), led by a potential takeover.
Here is what Nuvama Institutional Equities said on the AMCs under its coverage:
- We have further reduced FY27E target multiple on HDFC AMC to yield a target price of Rs 4,610 (earlier Rs 5,200), while maintaining ‘buy’. HDFC AMC remains one of our top picks.
- Due to NAM’s significant exposure to mid and small-cap stocks in its equity (48 percent), we have reduced Q4FY25E equity AUM to Rs 2.7 lakh crore (-6.5 percent QoQ). Consequently, we are cutting NAM’s target price to Rs 680 (earlier Rs 810), but maintain ‘buy’. NAM remains our top pick.
- Given a 3 percent market share in active equity AUM as of December 2024, UTI AMC ranks tenth in the industry. We have a target price of Rs 1,180 (earlier Rs 1,390), and maintain ‘buy’.
- For ABSL AMC, Nuvama altered its valuation, resulting in a lower target price of Rs 690 (earlier Rs 700), and maintain ‘hold’.
- We are building in a reduction in FY26E domestic mutual fund equity under management of KFin Technologies to Rs 1,290 crore, down -15.3 percent, due to the equity market correction. The brokerage has an updated target price of Rs 1,230 (earlier Rs 1,330), and maintain ‘buy’.
- We are valuing CAMS at FY27E P/E multiple of 34.3x, leading to a reduced target price of Rs 3,970 (earlier Rs 4,190) and downgrade the stock to ‘hold’ (earlier ‘buy’).
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