Shares of Emkay Global Financial Services Ltd surged 20% to hit the upper circuit on Thursday after the stockbroking company received approval from the Securities and Exchange Board of India (SEBI) for launching a mutual fund business.
"We wish to inform you that the company has received in-principle approval from the Securities and Exchange Board of India, Investment Management Department for sponsoring a Mutual Fund," Emkay Global says in an exchange filing.
The stock jumped 20% to close at ₹80.20 on the National Stock Exchange (NSE). On a year-to-date basis, the counter has risen 3.35%, while it has declined 30.71% over the past year.
Emkay Global Financial Services offers services such as institutional equity, portfolio management services, wealth management, and investment banking among others.
Fortune India earlier reported that there are less than 50 mutual fund houses in India while there are over 4,000 mutual fund companies in the U.S. Financial market experts have frequently expressed that more Asset Management Companies will deepen the financial market in a country where demat accounts are still less than 10% of the country's population.
In March, the market regulator allowed private equity funds to sponsor mutual funds. The decision was taken at a board meeting chaired by SEBI chief Madhuri Puri Buch. The move is expected to give greater flexibility to the industry, and allow the self-sponsored AMCs to continue the mutual funds business, the market watchdog said. Currently, any company or entity, which has a 40% or more stake in mutual funds, is considered the sponsor.
"The Board approved amendments to SEBI (Mutual Funds) Regulations, 1996 under which, while strengthening the existing eligibility criteria for sponsors, introduced an alternative route to enable a diverse set of entities to become sponsors of MFs. Such entities, who otherwise may not have been eligible to be sponsors, include private equity funds, with requisite safeguards included in the proposal. The amendments also allow for 'Self Sponsored AMCs' to continue the mutual fund business, subject to the said AMCs fulfilling certain criteria. This would give the original sponsor flexibility to voluntarily disassociate itself from the MF without needing to induct a new and eligible sponsor," SEBI said last month.
Meanwhile, India's largest stock broking firm Zerodha will partner with fintech platform smallcase to start a new asset management business (AMC). "While awaiting the final approval of our AMC (mutual fund), we asked if we should build it ourselves or collaborate. Given the 6+ years of experience that @smallcaseHQ has in building investment products, it made perfect sense to create a joint venture (JV) to build the AMC," Zerodha founder Nithin Kamath wrote in a tweet last week.