Mutual fund houses have been holding more cash than in the past. They held the equivalent of 1.9 per cent of equity assets in cash in June 2021, shows data from tracker primemfdatabase.com, reported Business Standard.
This has since risen to 2.99 per cent as of May 2022. The total amount in cash is up from ₹31,598 crore to ₹59,886 crore in the same period.
The rise could also be a function of inflows, according to one financial services executive. He suggested that mutual funds could simply be getting more cash than they would have deployed, rather than actively seeking to sell portfolio stocks to ride out recent market volatility.
Individual fund houses are sitting on more cash than others. There were at least five fund houses that held more than 5 per cent cash as of May-end. There were four such fund houses in May 2021-none of them had a double-digit cash holding, unlike now, with the top cash holding at 10.8 per cent for PPFAS Asset Management, the report said.
The increased cash levels could be an outcome of inflows coming in towards the end of the month, or prices remaining above levels at which orders have been placed for execution, said Rajeev Thakkar, chief investment officer, and director at PPFAS Asset Management said. He added that he does not expect cash levels to significantly increase above current levels, BS report said.
MFs were net buyers by an average of ₹14,992 crore in the financial year 2021-22. They were net buyers by ₹22,371 crore in April, the first month of the latest financial year, shows regulatory data.
They received ₹12,286 crore in May through systematic investment plans (SIPs) which make automatic periodic monthly investments.
This is higher than the ₹11,863.09 crore seen in April, according to data from the industry body, the Association of Mutual Funds in India (Amfi). The number of such SIP accounts was at an all-time high of 54.8 million in May, showed AMFI data.
The inflows have come despite a challenging time for the markets with a correction of nearly 20 per cent from its all-time highs in October.