Brokerages have raised their ratings on HDFC AMC and Nippon Life India, two of the top asset management companies in the country, a report by Business Standard stated.
This comes after the companies reported an increase in their profits in the third quarter of financial year 2022-23, added the report.
While HDFC AMC's profit increased 2.7 percent in the previous quarter, Nippon AMC's bottom line witnessed a rise of 18 percent.
Apart from the AMCs' individual performances, the brokerages' bullishness is also driven by the positive long-term outlook of the industry, noted the report.
"Long-term prospects of the Indian AMC industry remain intact given the low penetration levels in India vis-à-vis developed countries and is a play on the financialisation of savings in India," said Axis Securities, as per the report.
BS pointed out that Nippon reported a good quarter in Q3 on the back of superior fund performances and improved core profitability.
"With sustained growth in retail market share, increase in the share of higher-yielding equity mix and healthy growth in SIP inflows we believe NAM is in a better position to grow," the report quoted Axis Securities as saying.
"We are encouraged by the improvement in SIP market share at 7.3 percent and argue this is key for long-term franchise strength and sustainability. Additionally, we expect Nippon to capitalise on its rising credibility to raise HNI/institutional capital," HDFC Securities said, according to BS.
Meanwhile, HDFC AMC's revenues remained flat but it scored well on other parameters. Brokerages expect an upside of up to 15 percent on the back of a rising share of equity funds in AUM, improved fund performances and growth in market share in incremental flow of investments, stated BS.
"HDFC AMC, the third largest player in the industry, has maintained 11 percent average AUM market share for the past three quarters, after ceding ground to competitors over a prolonged period," the report quoted BOB Capital as saying.
The brokerage firm has upgraded the stock from 'hold' to 'buy', it added.
