MUMBAI, Dec. 18 -- The sharp fee cuts India's mutual fund industry had been bracing for have not materialized. Instead, the Securities and Exchange Board of India's (Sebi) decision to dilute its earlier proposal on brokerage and expense caps has eased margin concerns for fund houses while improving transparency on expenses. These changes, however, are unlikely to meaningfully boost investor returns.

On Wednesday, the regulator capped brokerage costs for mutual funds at 6 basis points (bps) in the cash market, down from 12 bps, and at 2 bps in derivatives, compared with the current 5 bps. It also scrapped the additional 5 bps that could earlier be charged over exit loads-fees levied when investors redeem their investments. The revised pro...