At the end of October, overall cash holdings across equities, debt, hybrid, and commodities funds increased to 5.64 percent, or Rs 3.77 lakh crore, of the industry’s total AUM.
According to statistics from Prime Database MF, active equity funds remained on cash piles in October as cash holdings as a percentage of category assets hit 4.91 percent, the highest level since May 2023.
As of the end of October, the total assets under management (AUM) of active equities mutual funds were approximately Rs 30 lakh crore crore.
Active multi-cap, large-cap, big & mid-cap, mid-cap, small-cap, dividend yield, contra, value, focused, sectoral/thematic, ELSS, and flexi-cap plans are all included in this category of funds.
At the end of October 2024, however, the cash holdings of all active equity funds decreased to Rs 1,46,957 crore from Rs 1,47,588 crore the month before.
Additionally, data indicated that at the end of October, total cash holdings as a percentage of industry AUM increased to 5.64 percent, or Rs 3.77 lakh crore. This number encompasses the categories of debt, hybrid, equity, commodities, foreign exchange, and passive funds.
The total cash holding of the mutual fund sector was at its highest level since February 2022, when it was Rs 4.19 lakh crore, at Rs 3.77 lakh crore.
Mutual fund houses’ increased cash holdings coincide with the equities markets’ decline. On November 14, Indian indices closed lower for the sixth straight day, with the Nifty closing below 23,550. A 0.14 percent decline in the Sensex at 77,580.31.
Foreign institutional investors (FIIs) have been the main sellers in Indian equities markets over the last 1.5 months, while domestic institutional investors (DIIs), particularly mutual funds, have been the buyers.
Even if funds do nothing, the cash component continues to move as a percentage. For example, if stocks are 90 percent and my cash is 10 percent, and stocks drop 10 percent, as Nifty has done, the stock value drops, but the cash stays the same. However, it can appear greater as a percentage, according to PPFAS Mutual Fund Chief Investment Officer Rajeev Thakkar.
Experts also think that while institutions have been investing more money in the equities markets, retail investors have a clear intention to trying to play it smart.
Inflows into equity funds increased by 22% month over month (MoM) to Rs 41,887 crore in October. As investors boosted their wagers amidst the month’s gloomy market trend, mutual fund contributions made through monthly systematic investment plans (SIPs) crossed the Rs 25,000-crore threshold for the first time.
“Institutions want to hold onto some more dry powder before they deploy, but retail is committing a lot of capital,” said Nirav Karkera, Head of Research at Fisdom. Karkera thinks that a substantial deployment is taking place with the remaining money in addition to cash holdings.
“The net deployable amount in the hands of institutions is also growing at a faster pace than the pace at which cash levels are growing, even though the cash level is still rising,” he continued.
According to Motilal Oswal Financial Services’ most recent report, there were significant shifts in the industry and the distribution of funds among stocks in October.
The monthly weights of Oil & Gas, Consumer Durables, Automobiles, Consumer, NBFCs, Utilities, Retail, Telecom, and Metals reduced, while the weights of Banks (Private & PSU), Capital Goods, Healthcare, Technology, and Cement climbed.
In contrast, SBI Mutual Fund, which has the largest active equities book, had the largest cash allocation at Rs 23,146 crore as of the end of October, according to data from Prime Database MF. The next-largest cash holdings in its active equities funds were Rs 20,469 crore for ICICI Prudential MF and Rs 18,956 for HDFC MF.
As a proportion of plan category AUM, PPFAS MF active funds held 15.46 percent, or Rs 13,255 crore, in cash holdings, the most of all major fund firms. In addition, Quant MF’s active equity funds held cash holdings of Rs 6,149 crore, or 7% of scheme category AUM.
