While the total expense ratio (TER) cuts look very large, AMCs will be looking to pass on most of the cuts to the distributors and resulting impacts on stocks will be limited and certain cost saving measures can net off the impact. Having said that, the cut is too large and passing it to distributors will not be an easy task, especially on incremental flows.
Over the past 3-4 years, the payouts to the distributors were increased materially and, to that extent, a large part of the hit can still be passed on, but size has permanently become a constraint now, both from an out-performance perspective and a payout perspective, which can impact market shares.
