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2QFY26 has been a weak quarter for equity markets with Nifty down 4% and mid and small cap indices underperforming the Nifty. While this results in weak other income for mutual funds, operating performance is expected to be strong as equity QAAUM growth looks 5%+ for the covered companies. We expect HDFCAMC to report 12% PAT growth YoY while NAM and UTI AMC report 3%/33% YoY decline in earnings. Within brokers/wealth managers, we expect 360 ONE WAM to outperform with 20% PAT growth YoY, while Nuvama reports 3% PAT growth and Angel One is expected to see a 42% decline in PAT (up 114% QoQ). We prefer 360 ONE WAM in the space, with its expansion into revenue streams of HNI segment and broking, followed by Nuvama and NAM.

* Asset management companies: Strong MTM in 1Q and enhanced inflows in 2Q imply 5% or higher equity AAUM (Average AUM) for mutual funds, translating into higher core revenue and earnings. For 2QFY26, we expect all three AMCs – HDFC AMC, NAM, and UTI – to report 4-6% QoQ growth in core revenue and 3-11% growth QoQ in core earnings, with UTI AMC > NAM > HDFC AMC. However, we expect weak other income, resulting in a QoQ PAT decline for all three. On a YoY basis, we expect PAT growth of 12%/-3%/-33% for HDFC AMC/NAM/UTI AMC.

* Broking and wealth management companies: All three of 360 ONE WAM, Nuvama WM and Angel One are entering adjacent segments – 360 ONE WAM to HNI and broking segments, Nuvama WM expanding in wealth and AMC from a capital markets heavy business and Angel One expanding into client funding and third party distribution. We believe 360 ONE WAM has taken the costs over FY25 and should see strong PAT growth hereon. We expect wealth management yields to be supported by its HNI foray while broking adds revenue and profits. In Nuvama, we see a play towards higher recurring revenue (and profitability) even as earnings growth looks weak on a strong base of 55% growth in FY25. Meanwhile, while Angel diversifies its revenue, the stock has corrected with declining market volume (and revenue), and offers a good entry point, subject to continuity in regulatory stance in the options expiry calendar.

* Valuations and view – prefer wealth managers in the space: We continue to prefer NAM in the AMC space, followed by HDFC AMC. Given the mutual funds’ efforts to rationalise distributor commissions, we wait for company concalls to review yields. We do not materially change estimates, raise our target price for Nippon AMC to INR 975 (at 34x FY27e EPS of INR 29, up from INR 930 earlier) and cut TP to INR 1,444 for UTI AMC (at 19x FY27e EPS of INR 76, down from INR 1,500 earlier). We maintain our positive stance on the wealth management space, and prefer 360 ONE WAM, valuing it at 34x FY27e EPS of INR 39.

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