The hit that the equity markets have taken is likely to translate into lower revenues for the Rs 24-trillion MF industry, with the share of higher-fee generating equity assets shrinking to 37 per cent as of March-end, from 43 per cent at March-end last year.

“The fees charged on equity assets are typically higher than those charged on debt assets. With share of equity shrinking in the overall pie, industry players will see their revenues come under pressure,” said senior executive of a fund house.

In 2018, the Securities and Exchange Board of India (Sebi) had tweaked total expense ratio (TER) structures so that as schemes gain scale and size, the TERs come off and vice-versa.

While cut in assets will allow MFs to charge higher TERs, overall revenues are still likely to see a hit.

“In the current context, as equity AUM (assets under management) has dipped materially, TER charged on some funds has increased marginally. (But) trail commissions on the AUM are fixed irrespective of the TER charged. Hence, yields may improve marginally, however, absolute revenue will fall led by dip in AUM,” Axis Securities said in a client note.

Besides tweaking the asset slabs, Sebi had also reduced the cap on equity TERs to 2.25 per cent, from 2.5 per cent.

Meanwhile, fund houses seeing significant outflows from their debt schemes face a double-whammy. “Some fund houses have lost significant market share in debt-oriented schemes with investors avoiding such schemes due to higher level of credit risks sitting in their portfolios,” said a fund manager.

“For these fund houses, both debt and equity businesses are likely to yield a muted revenue growth in the new financial year,” he added.

While price-led erosion will have an impact on the asset base, the slowdown in equity flows will also weigh on industry’s ability to expand the asset size.

“The investor sentiments have been weak given the volatility in markets. Further, the Coronavirus-induced lockdown has taken toll on investors’ cash flows, which has hurt their investing capacity. As a result, investors have become cautious and are sitting on sidelines,” said Srikanth Matrubai, chief executive officer of Sri Kavi Wealth.

After showing resilience in March, equity flows saw sharp slowdown in April, falling 47 per cent. Equity schemes garnered Rs 6,212 crore, as against Rs 11,722 crore in previous month.

After showing recovery in April, Equity markets have also continued their downward trajectory. So far, the benchmark Nifty is down over ten per cent in May, after recouping 14.68 per cent gains in last month.

On Monday, the Nifty cracked 3.4 per cent, as the details of the Rs 20 trillion stimulus package announced by the government did not cut ice with markets. Concerns over recessionary pressures on India's economy and US-China trade tensions added to the risk-off sentiment.