Asset management businesses of both Reliance Group and HDFC Group have proven themselves and had a successful listing story. HDFC Asset Management Company (AMC) received a 58 percent premium on the day of its listing, while Reliance Nippon AMC was listed at a 17 percent premium. One more that’s going to join these two stocks next year is UTI AMC, which is expected to receive an even bigger premium. But who will be the biggest player in this space then?

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In the last year, both these stocks have delivered nearly 100 percent returns. In terms of valuations, Reliance Nippon sits at a much comfortable valuation of 41.13x as compared to HDFC AMC’s 54.57x. The recent cooling off in both the stocks is on the back of rich valuations.

"If you look at the asset management industry globally and compare what is happening in India, the valuations are really rich for HDFC AMC and Nippon," quoted Sudip Bandyopadhyay, group chairman, Inditrade Capital.

He further added, "If you compare this with what valuation AMCs that are being bought and sold today, on the private space, I think they are on average selling at 4 percent of the assets. This can be further drilled to about 3-4 percent of equity and about 1 percent of the debt they manage and that is how the valuation in the unlisted space is derived at. When compared to the listed companies, it is fantastic. So I would say that there is a compelling reason for the rally in HDFC and Nippon to stop and consolidate for some time. Let the performance catch up, I think it is good that they are taking a pause."

Furthermore, UTI AMC is going to enter the AMC space next year and could see some reshuffling in the space. On that front, Bandhopadhyay said, "I understand UTI AMC offer which they are offering is much cheaper than that to HDFC AMC and Nippon. But as I said, overall space itself is quoting at valuations which are rich."

He also said that a long-term investor can remain invested in HDFC AMC for five years, however, it’s not the right time for the short term investors to enter.