Domestic money managers feel that markets nearing their new lifetime high are calling for some caution on the back of rising cash levels. Quoting a brokerage report, Business Standard stated that the average cash holdings with the top 20 fund houses rose to 5.6 percent at the end of April, from 5 percent at the end of March.
As per the report, the increase in cash levels comes on the back of the selling of ₹5,100 crore in April amid a broad-based rally in the markets. From this year’s low, benchmarks Sensex and Nifty have rallied over 8 percent each. The sharp gains have once again pushed the one-year forward valuations for these two indices above their historical average, noted BS.
Further, analysts told BS that the valuations may look more expensive as there is a downward risk to earnings growth projection due to global uncertainty. They added that rising cash levels signal some degree of nervousness. However, as equity mutual funds (MFs) are not allowed to sit on a pile of cash, they are rotating their bets, stated the report.
BS also pointed out that the list of most-sold stocks by MFs indicates that fund managers booked profits in red-hot stocks in outperforming sectors like automotive and banking.
A report by Fisdom Research shows a 4-6 percent decline in the number of shares held by MFs in companies like Eicher Motors, Hero MotoCorp, and Bajaj Auto, noted BS, adding that the paring of stake in select automotive stocks comes after MFs invested an average of ₹6,500 crore in automotive stocks in the past six quarters.
The other sector to predominantly feature in the most-sold stocks list was public sector banks (PSBs). Quoting the Fisdom report, BS observed an 8-5 percent month-on-month decline in the number of shares held by MFs in the Bank of India, Central Bank of India, Indian Overseas Bank, and UCO Bank.
MFs have been paring their holdings in PSBs for the last few months after a major rally in their stock prices in the last year or so, it added. BS also informed that domestic MFs were net-sellers of PSB stocks for the first time in the nine quarters in Q4, as they offloaded shares worth ₹1,800 crore.