Mutual funds' average cash holdings in equity schemes topped 6 percent in February as fund managers went slow on the deployment of new inflows on expectations of better buying opportunities amid uncertainties in the market, noted a report by Business Standard.
"Right now our cash holding is at a higher level. We never force ourselves to buy stocks as and when fresh money comes in. The market has been choppy and we have been waiting for the stock prices to come to our target levels. As and when the opportunity arises, we will deploy the cash," Rajeev Thakkar, Chief Investment Officer and Director, Parag Parikh Financial Advisory Services (PPFAS) MF, which has the highest cash holding in equity schemes (14 percent) among the top 20 fund houses, was quoted as saying.
Cash levels in equity schemes have been rising consistently since May 2021, when the average cash holding of equity schemes of the top 20 fund houses stood at 3.2 percent, informed the report. The February 2023 level of 6.2 percent is the highest between May 2021 and February 2023, it highlighted.
Apart from PPFAS MF, three other major fund houses — Axis MF, PGIM India MF and SBI MF — were holding cash in excess of 10 percent at the end of February, mentioned BS.
The decision to increase cash levels amid sustained inflows has proved to be wise, noted the report.
The Nifty has tanked close to 7 percent so far this calendar year. The benchmark index is on the verge of ‘correction’, having declined 9.78 percent from its all-time closing high of 18,813 on December 1, it stated.
Fund managers expect the market to tread sideways or even decline more in the next few months, allowing them to buy stocks at a better valuation, as per the report.
The higher cash levels are also partly a result of continued flow of retail money into mutual funds, irrespective of the market condition, noted BS.
“Collections through the SIP route have remained above ₹10,000 crore since September 2021. In February, the inflows stood at ₹13,686 crore. Together the SIP and inflows have ensured higher cash levels with MFs even as they have deployed record sums of money in the equity market. The net investments by MFs in equities have now remained above ₹1.5 trillion for two consecutive financial years,” it said.
