Are AMC stocks still a good bet even as markets correct?
Subscribe to enjoy similar stories. Asset management companies (AMCs) were among the top picks for many investors during the Indian markets' bull run. But over 10% correction has turned the tide for Indian asset managers.
The question now is: Are AMC stocks still a good bet? Over the past three years, shares of Aditya Birla Sun Life AMC Ltd, Nippon Life India Asset Management Ltd, and HDFC Asset Management Co. Ltd have appreciated between 24% and 66%. Bajaj Finserv Ltd’s stock gained only 11%, while UTI Asset Management Co.
Ltd climbed 21%. In comparison, the Nifty 50 gained 33% during the same period. However, the good show petered out over the past month, with all wealth managers registering 10-25% declines, except for Bajaj Finserv, which has risen by about 6%.
Meanwhile, the Nifty 50 has fallen 3%. “The long-term prospects of the Indian asset management industry remain intact, given the low penetration levels in India vis-à-vis developed countries," said a 24 January report by Axis Securities Ltd. Not just that, “It is a play on the financialization of savings in India," the report added.
The brokerage expects Nippon Life India Asset Management to benefit in the long run. Still, because of market volatility, it has marginally lowered its estimate of the company's assets under management (AUM) growth. Investors tend to react to high volatility by withdrawing money or switching between schemes, which in turn affects fund inflows and outflows.
AMCs are closely tied to capital market movements, driven by operating leverage, mark-to-market (MTM) fluctuations, and AUM, explained Aditya Sood, fund manager at InCred Asset Management Pvt. Ltd. He said rising AUM boosts profitability due to operating leverage, but during
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