The Portfolio Management Services (PMS) industry in India has formally approached the Securities and Exchange Board of India (SEBI), requesting a significant reduction or complete removal of the fees paid to stock exchanges for using their benchmark indices to evaluate performance. This development follows a crucial meeting between the Association of Portfolio Managers of India (APMI) and SEBI Chairperson Tuhin Kanta Pandey on November 12.
The Core Argument: Public Data, Private Cost
The central plea from portfolio managers is that the value of benchmark indices like the NSE Nifty 50 and the BSE Sensex is publicly available information. Therefore, they argue, paying an annual fee of approximately ₹1 lakh per benchmark to the exchanges is an unnecessary financial burden. This fee is not a one-time cost; for every new investment strategy—such as a large-cap, mid-cap, or small-cap scheme—a PMS provider must pay an additional fee to use the appropriate benchmark.
Sagar Lele, Executive Director at Paterson PMS, highlighted how these costs accumulate. "We have a large-cap scheme, a mid-cap scheme, a small-cap scheme—each has to use the appropriate benchmark," he explained, underscoring the multiplicative nature of the expense for firms with diverse offerings.
A Pinch for the Small, a Nudge for the Large
While large PMS firms may absorb this cost, it significantly impacts smaller players, especially during a period of heightened regulatory scrutiny and rising compliance costs imposed by SEBI. The industry is currently required to submit up to 12 reports per month to the regulator, covering extensive client and transaction data.
The financial strain on smaller firms is stark. According to industry experts, a PMS needs assets of around ₹150 crore to break even. Smaller players managing portfolios between ₹50-100 crore find a fee of a couple of lakh rupees particularly heavy. Rajkumar Singhal, CEO at Quest Investment Managers, confirmed that for these firms, even seemingly small fees can feel substantial due to their lower income.
The Scale of the Payout and a Proposed Solution
As of March 2025, there are 472 registered PMS providers in India. A conservative estimate, assuming each pays for just one benchmark, puts the total annual payout to exchanges at around ₹4.72 crore. The actual figure is likely higher due to multiple strategies run by individual firms.
Some within the industry have proposed a collective solution. Vijay Bharadia, Founder and CIO at Wallfort PMS, suggested that APMI could negotiate a lower, consolidated fee on behalf of all PMS providers. "Democratizing the cost of access to benchmark data through the APMI platform will not only support new or smaller players but also help existing PMS providers deliver services more cost-effectively," he stated.
However, an anonymous executive from a stock exchange indicated that SEBI is unlikely to intervene in how exchanges price their products. Emails sent to SEBI, NSE, and BSE regarding the matter had not been answered at the time of the original report. The outcome of this appeal remains a critical point of discussion for an industry that managed a substantial ₹8.37 trillion in non-EPFO assets as of September 30.
