Elevated valuations in the stock markets amid trade uncertainties and a variety of new fund offers in July took the total cash kitty of mutual fund houses to more than Rs 4 lakh crore for the first time.
PrimeMF July database showed that the amount rose by nearly 18% month-on-month to Rs 4.16 lakh crore after falling for two consecutive months before that.
Fund houses with biggest cash pile-ups
Among the fund houses whose cash holdings increased the most are SBI MF, Axis MF, and Aditya Birla Sun Life MF by Rs 10,396.19 crore, Rs 7,952.85 crore, and Rs 4,404.51 crore respectively while that of Franklin Templeton MF, Canara Robeco MF, PGIM India MF, and DSP MF fell in the range of Rs 419.64 crore and Rs 597.82 crore.
In equity schemes, cash holdings net rose by Rs 2,034.61 crore to Rs 1.52 lakh crore. As a percentage of equity assets under management TRUST MF, Quantum MF, PPFAS MF, and Old Bridge MF had 10.5%-12.96% in cash and Samco MF and Motilal Oswal MF had around 8%.
According to Kaustubh Belapurkar, director – manager research, Morningstar Investment Research India, most equity managers prefer staying fully invested, typically holding less than 5% in cash in most scenarios.
“In times of exuberant markets due to excessive flows or valuations, this number might inch up slightly, but cash levels tend to stay in single digits as managers will look to judiciously deploy into the market at opportune moments,” he said.
NFOs and uncertainty drive cash creation
Some of the rise was driven by 30 NFOs launched in the month. Jio Blackrock raised the whole Rs 3,524 in cash it holds by launching three debt funds and TRUST MF launched its multicap fund. Among stocks, maximum reduction in value of holdings was witnessed in the shares of Bharti Airtel, Solar Industries, IndiGo, and MCX.
Experts said that cash has been created due to the uncertainty. Sandeep Bagla, CEO of TRUST MF believes that the cash is not likely to be deployed in a hurry as valuations are still not compelling, earnings growth unclear, and trade related uncertainty.
“There were expectations that the additional tariff will not be implemented but now it looks like he has singled us out,” he said adding that the multicap fund currently will allocate around 25% each in large-, mid,- ,and small-caps as he believes that while large caps are less overpriced sectoral opportunities of higher growth can be found in broader markets due to the uncertainty.