Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns. – John C. Bogle
There is no need to introduce John C. Bogle to readers of this newsletter. The well-known American investor and founder of the Vanguard Group was among the strongest proponents of the low-cost index funds, which we at Kuvera have also been recommending for years. So, what reminded us of Bogle again?
Well, it’s because of a set of new proposals put out by the Securities and Exchange Board of India (SEBI) this week that will affect each one of Kuvera’s users. You see, the capital markets regulator has proposed to overhaul the mutual fund fee structures as part of a broader review of MF regulations.
The review aims to improve transparency and remove rules that are no longer useful. The review becomes essential as the MF industry is currently governed by the SEBI (Mutual Fund) Regulations, 1996. Over the past three decades, the industry has grown by leaps and bounds—its assets under management have jumped to more than Rs 75 trillion (about $860 billion) from Rs 47,004 crore at the end of 1993, according to the Association of Mutual Funds in India.
So, what exactly has SEBI proposed now?
In a consultation paper published this week, the regulator suggested a more transparent break-up of the fee that fund houses charge investors. This fee is called the total expense ratio (TER), which is meant to cover the mutual fund’s operating costs and is deducted from the net asset value (NAV) of the schemes.
Essentially, this expense ratio is the difference between the net return and gross return on your investments. A higher ratio, therefore, brings down your net returns.
SEBI has now proposed that the TER should exclude brokerage, taxes and other costs not related to the fund house, and that the break-up must be disclosed upfront. Basically, this means investors would now know exactly what part of their TER is the fund house’s own costs versus brokerage, the securities transaction tax, GST, and stamp duty etc.
SEBI also proposed that the TER of a scheme can be linked to its performance. So, if a scheme performs well, the fund house could charge a higher TER, and vice versa. However, this would be voluntary for fund houses.
In another significant proposal, SEBI said that the cap on brokerage fees paid by mutual funds for cash market transactions would be cut from 12 basis points to 2 basis points. For derivatives, SEBI has proposed reducing brokerage fees transactions from 5 basis points to 1 basis point.
So, how will these proposed changes impact MF investors, fund houses and distributors?
For investors, any reduction in the TER would be welcome as it would boost their net returns. But the size of the actual reduction is unclear yet. This is because SEBI has proposed to allow fund houses to charge certain expenses like taxes outside the TER, so there may not be much of a difference overall to investors.
As for distributors, fund houses could reduce their commissions to offset the impact of a cut in TERs and brokerages. Broking firms and fund houses could be hit, too, with some analysts saying the move could decrease their pre-tax profit. No wonder, then, shares of broking firms and asset management companies fell 4-8% on Wednesday after the proposals were unveiled.
But, again, it’s too soon to tell the actual impact. We will wait for SEBI to finalise these proposals and get back to you when it does!
Right on the Money
The MF industry in India isn’t the only one looking at big changes; the banking and non-bank lending industry is also going through an overhaul with some help from the finance ministry and the Reserve Bank of India.
Consider this: In 2025, there have been at least six multi-million-dollar cross-border transactions involving Indian banks and non-banking finance companies.
Earlier this month, Dubai bank Emirates NBD agreed to buy a 60% stake in RBL Bank for $3 billion. This is the largest overseas acquisition in the Indian financial services sector so far. This comes soon after Abu Dhabi’s International Holding Company (IHC) agreed to invest almost $1 billion to buy a 43.5% stake in Sammaan Capital, the NBFC earlier known as Indiabulls Housing Finance. Also this month, American private equity firm Blackstone agreed to invest Rs 6,197 crore ($705 million) in Federal Bank, picking up a 9.9% stake.
In May, Japanese giant Sumitomo Mitsui Banking Corporation acquired a 20% stake in Yes Bank for $1.6 billion. It then bought an additional 4.99% in September. In April, American PE firm Warburg Pincus and Abu Dhabi Investment Authority invested $877 million in IDFC First Bank while another American PE firm, Bain Capital, acquired 18% of Manappuram Finance for $508 million in March.
And now, the finance ministry and the RBI are working to attract more foreign capital into the banking sector. According to media reports, the government is planning to allow foreign direct investment of up to 49% in state-run banks, up from 20% currently. FDI up to 74% is already allowed into private-sector banks.
Simultaneously, the government is also reportedly thinking of merging some state-owned banks. The country has 12 state-owned banks currently. Media reports say the finance ministry is considering options to merge Indian Overseas Bank and Indian Bank, and combine Mumbai-based Union Bank of India and Bank of India.
Punjab & Sind Bank and Bank of Maharashtra, among the smaller PSU banks, could be privatized in the future. Meanwhile, the process to privatize IDBI Bank is also underway.
Of course, there is no certainty whether all these proposals will eventually go through or if only some of these will. But if they do, it would change the shape of the Indian banking industry.
Run Lola Run
In the 1998 cult film Run Lola Run, the protagonist relives a 20-minute scenario three times, each with a dramatically different ending. Now, imagine if something like that were to happen with your investments! And that would have happened to some of the investors who bet on SME IPOs, if a recent RBI analysis is any indication.
A few Kuvera readers may remember that our 2023 annual economy and market report had a chapter on SME IPOs: “High Risk, High Rewards.” But it could well have been “High Risk, Low Rewards” or “High Risk, No Return”!
In the first scenario, let’s say Lola invested in Concord Control Systems’ SME IPO back in late 2022. Today, the stock trades around Rs 1,786, meaning a Rs 1 lakh investment would be worth nearly Rs 32 lakh. It’s a jackpot for Lola and a reminder that once in a while the market gods can be exceedingly generous.
Meanwhile, in an alternative timeline, let’s say Lola bet Rs 1 lakh on the much-hyped IPO of Resourceful Automobile in 2024. The offering was nearly 400 times oversubscribed. But fast forward to today, and that Rs 1 lakh has shrunk to roughly Rs 54,000. It’s the equivalent of Lola’s run ending in failure, despite all the initial adrenaline.
In the third outcome, imagine our investor simply put the Rs 1 lakh into a Nifty 50 index fund in 2022 and held on. By October 2025, that broad-market bet would have grown to roughly Rs 1.43 lakh, about a 43% gain or an annual return of about 12.4%. It’s a far cry from Concord’s windfall, but also miles better than Resourceful’s loss.
SME IPOs can be like Lola’s high-stakes runs: a mix of adrenaline, luck, and peril. One offering can crater, while another can morph into a multi-bagger that defies all expectations. By contrast, the Nifty 50’s trajectory feels almost tranquil: slower and more orderly, albeit never guaranteed.
The RBI’s October 2025 analysis confirms these dynamics. Mainboard IPOs showed relatively stable, narrower outcomes, often hovering around modest positive returns. But small-cap SME IPOs exhibited a “flatter and wider distribution” of returns, with far higher variance. In plain English, the range of outcomes for SME stocks was all over the place: plenty of duds alongside a few spectacular outliers, something we had pointed out in the 2023 report.
Over a six-month horizon, many mainboard IPO stocks clustered near a small gain, whereas the SME cohort included both numerous big losers and a handful of rockets.
Moreover, RBI researchers noted a troubling pattern: SME stocks often enjoy massive listing gains, only to slide soon after. For investors, the takeaway is not that all SME IPOs are traps or that they’re all tickets to multibagger riches, but rather that they defy easy generalisation. Each listing is its own adventure, with company-specific fundamentals, market sentiment, and timing all playing pivotal roles.
Put simply, the fortunes of SME IPOs don’t exist in a vacuum. They are intertwined with where big money is moving, how expensive money is to borrow, and how freely money is being lent. It’s a reminder that in finance, as in Run Lola Run, every outcome is a product of both choice and chance, played out against the broader backdrop of the economic environment.
Fed Digs in Heels
In its last monetary policy meeting, the Reserve Bank of India (RBI) stayed pat on interest rates and hinted there may be room for cuts later in the financial year. The US Federal Reserve, however, just did the opposite. It cut rates by 25 basis points, only for Fed Chair Jerome Powell to swiftly cool hopes of further easing.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it,” Powell said.
So why is Powell upping the ante? Is it the usual central banker caution, or a subtle pushback against President Donald Trump, who has been openly threatening consequences if the Fed doesn’t deliver deeper cuts?
At the post-policy press conference, Powell dropped a hint. “A growing chorus within the committee suggesting it may be time to pause… We’re 150 basis points closer to neutral than we were a year ago… maybe this is where we should at least wait a cycle,” he said.
This may not be great news for those in India hoping for interest rates to fall. The RBI usually also considers the spread between Indian and US interest rates—a gap that needs to stay wide enough to attract global capital. If that spread narrows, US investors could opt for safer Treasuries instead.
Within this spread, the cost of currency hedging also eats into returns. Because the Indian rupee typically depreciates, foreign investors hedge against currency risk, shaving about a percentage point off their potential yield. To remain attractive, Indian benchmark gilts must yield 2 to 3 percentage points more than comparable US Treasuries.
These factors will weigh heavily on the minds of MPC members as they chart their path ahead.
Market Wrap
India’s stock market benchmarks slipped a tad this week on profit-taking but ended October with their biggest monthly gains in seven months, driven higher by the return of foreign portfolio investors.
The Nifty 50 and the BSE Sensex lost around 0.3% each this week. In October, however, the Nifty 50 jumped 4.5% while the Sensex gained 4.6%. The two indices are now 2.1% and 2.4% below their record highs, respectively, reached in September 2024. The small-caps climbed 4.7% while the mid-caps surged 5.8%.
Foreign investors bought shares worth nearly $2 billion in October, ending three months of outflows. This helped all 16 major sectors to post gains for the month.
For the week, Dr Reddy’s Labs was the biggest loser, falling more than 6% after it got a non-compliance notice in Canada for its semaglutide weight loss injection.
Drugmaker Cipla followed Dr Reddy’s close behind, dropping over 5% after it said its global CEO Umang Vohra would step down next year.
Financials and IT stocks mostly ended in the red this week, though both groups were among the biggest gainers for October. Bajaj Finance, Bajaj Finserv, Kotak Mahindra Bank, ICICI Bank, Axis Bank, and HDFC Bank slipped this week but State Bank of India ended higher.
Similarly, Infosys, Wipro, Tech Mahindra and TCS were on the losing side but HCL Tech bucked the trend. Mahindra & Mahindra, Maruti Suzuki, Bajaj Auto as well as FMCG companies Nestle, Hindustan Lever also fell this week.
SBI Life Insurance was the top gainer. Metal stocks climbed, too, with JSW Steel, Tata Steel and Hindalco ending higher. Shriram Finance, L&T, Eicher and Reliance Industries were the other major gainers this week.
Earnings snapshot
- ITC Q2 standalone profit rises 5.4% to Rs 5,180 crore, beats estimates
- Hyundai India consolidated profit climbs 14.3% to Rs 1,572 crore, exceeds estimates
- Cipla posts 3.7% rise in consolidated net profit to Rs 1,351 crore, tops forecasts
- L&T consolidated profit rises 16% to Rs 3,926 crore, revenue increases 10%
- Coal India consolidated net profit drops 30% to Rs 4,354 crore, misses forecasts
- Adani Green Energy consolidated profit rises 25% to Rs 644 crore
- TVS Motor profit jumps 37% to Rs 906 crore but misses forecasts
- Tata Capital profit rise to Rs 1,097 crore from Rs 1,076 crore a year earlier
- Dabur consolidated net profit rises 6.5% to Rs 453 crore
- Swiggy consolidated loss widens to Rs 1,092 crore from Rs 626 crore year ago
- Hindustan Petroleum standalone net profit jumps over sixfold to Rs 3,830 crore
- Kingfisher beer maker United Breweries profit slumps 64.5% to Rs 46.95 crore
Other Headlines
- Tata Trusts votes to remove businessman Mehli Mistry from its board
- IIFL Home Finance names former PNB Housing chief Girish Kousgi as CEO and MD
- Cipla’s global CEO Umang Vohra to step down, COO Achin Gupta to take over
- Google to offer free Gemini AI access to Reliance Jio’s 50.5 crore users
- Stock broker Groww fixes IPO price band at Rs 95-100, targets Rs 61,700 crore valuation
- Lenskart sets IPO price band at Rs 382-402, targets valuation of Rs 69,500 crore
- Wearables brand boAt files draft prospectus for Rs 1,500-crore IPO
- Refiners HPCL-Mittal Energy and MRPL stop buying Russia oil after sanctions
- BPCL, Oil India to build $11 billion refinery, petchem complex in Andhra Pradesh
- Microsoft CEO Satya Nadella to visit India in December
- Amazon plans to cut as many as 30,000 corporate jobs, reports Reuters
- Honda Motor buys stake in OMC Power to develop clean energy batteries
- India’s September industrial output rises 4% year on year
- Amazon India’s e-commerce exports top $20 billion, despite US tariffs
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Investing in International Markets
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today. #MutualFundSahiHai #KuveraSabseSahiHai
