Market Jumps: AUM Surge and MTM Gains Drive AMC Profits Despite Margin Headwinds, Says Nomura

Market Jumps: AUM Surge and MTM Gains Drive AMC Profits Despite Margin Headwinds, Says Nomura​

Nomura Securities has released its outlook on Asset Management Companies (AMCs) for Q1FY27, suggesting that strong industry growth in Assets Under Management (AUM) will effectively offset expected margin pressures. The brokerage maintains its conviction in Nippon Life India Asset Management (NAM), positioning it as the top AMC pick, while placing HDFC AMC next in line within their coverage universe.

Industry QAAUM Rebound: A Positive Surprise After March Correction​

The mutual fund industry demonstrated resilience in the June quarter, with the quarterly average assets under management (QAAUM) growing 2.0% sequentially. This performance was bolstered by a broader market recovery and strong results across equity segments, where QAAUM grew 2.9%.

Nomura noted that this level of growth constituted a positive surprise following the sharp correction seen in March. The rise was fueled partly by indices like Nifty Midcap 100 and Nifty Smallcap 250, which surged by 17% and 24%, respectively.

NAM and HDFC AMC Outshine Peers Amid Strong Market Gains​

NAM emerged as a clear outperformer among the listed AMCs, recording a Q-Q growth of 3.7% in overall QAAUM. The brokerage emphasized that NAM is gaining market share against its listed peers.

Similarly, fund performance trends show improvement for HDFC AMC. The percentage of AUM outperforming the benchmark in the one-year bucket rose to 75% in June from 22% in May.

The brokerage’s analysis showed significant disparity across key players; UTI AMC was noted to continue underperforming its peers, while NAM and HDFC AMC maintained strong positions based on their growth trajectories.

Profit Expectations: AUM Growth Offsets Margin Erosion for Key AMCs​

While core revenue yields are expected to see marginal quarter-on-quarter (Q-Q) declines of 0.2bp to 0.4bp, this trend is attributed to adverse AUM mix change and telescopic pricing within the equity AUM segment. Operating expenses at NAM and HDFC AMC are also expected to be elevated due to salary hikes and ESOP costs in Q1.

However, Nomura anticipates that higher Mark-to-Market (MTM) gains compared to 4Q26 will drive significantly higher other income. This is projected to result in quarter-on-quarter PAT growth of 18% for NAM and 25% for HDFC AMC.

Strategic Positioning by Nomura Analysts​

Nomura maintains a "Buy" rating on both NAM and HDFC AMC, driven by the former's superior AUM/earnings growth and consistency in fund performance. The brokerage holds that NAM’s strengths are complemented by its market share gains within their coverage universe.

In contrast, analysts maintain a "Neutral" rating on UTI AMC. Looking ahead, Nomura forecasts core revenue growth for AMCs under review to be between 0-3% Q-Q, expecting yields to moderate marginally as support from gold and silver ETF assets diminishes. Nevertheless, the robust MTM gains are expected to sustain sequential PAT growth across the sector.