On December 17 2025, SEBI approved new rules for mutual funds, stock brokers, and IPOs, replacing regulations that were 30 years old. The changes take effect April 1, 2026, and will change how much investors pay in fees.
The main changes are straightforward. Index fund fees will drop from 1.00% to 0.90% of assets. Equity mutual fund schemes under ₹500 crore will see fees fall from 2.25% to 2.10%. For stock brokers, the maximum they can charge drops from 12 basis points to 6 basis points for cash market trades. For derivatives, the cap falls from 5 basis points to 2 basis points.
SEBI also made the mutual fund rulebook shorter, from 162 pages to 88 pages, by removing outdated provisions and simplifying language.
The key change is in how fees are structured. Previously, brokers charged around 8-12 basis points and paid taxes and exchange fees from that amount. Under the new system, brokers get 6 basis points, while taxes and exchange fees are charged separately to mutual funds based on actual costs.
This makes costs more visible. When a mutual fund buys or sells stocks, it pays the broker 6 basis points. But GST, exchange fees, and other charges now appear as separate line items. Investors can see exactly what they're paying for each service.
Different companies will be affected differently. Large asset management companies like HDFC AMC and ICICI Prudential manage large amounts of money, so their costs per rupee managed are already low. They can handle the fee reduction more easily. Smaller fund houses with higher per-unit costs may find it harder to maintain profits.
For brokers, large firms with technology infrastructure, like ICICI Securities and HDFC Securities, can likely maintain business at lower fee levels through higher volumes. Smaller regional brokers working on thin margins may struggle. Some may need to merge with larger firms or exit the business.
Discount brokers that already charge low fees may see less impact since the gap between their pricing and traditional brokers is now smaller.
Lower fees could lead to more retail investment. When mutual fund costs drop, especially for index funds at 0.90%, more people may choose to invest through SIPs. India has over ₹5 lakh crore in household savings that could potentially move into markets.
The IPO changes also matter. Retail investors now get simplified prospectuses earlier in the IPO process, at the draft stage itself. This gives them more time to review information before deciding to invest. With 260 IPOs raising ₹1.5 trillion this financial year, easier information access could increase retail participation.
Several things to watch in coming months: How brokers adjust their business models after April 2026. Whether smaller brokers announce mergers or closures. Whether mutual fund companies see increased money flowing in due to lower costs. And whether SIP enrollment numbers increase after the new rules take effect.
These types of regulatory changes typically take 3-5 years to fully play out. Similar overhauls in the US and Europe showed that markets gradually shift toward lower-cost, more transparent structures, with some companies adapting successfully while others struggle.
The changes reduce costs for investors but compress profit margins for intermediaries. How companies adapt to this new structure will become clear over the next year.
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