MF equity cash holdings up by ₹4,000 cr amid volatile market

Mutual fund houses have increased the cash holding of equity schemes by ₹4,000 crore to ₹2.10 lakh crore in February against ₹2.06 lakh crore logged in January due to huge market volatility, according to JM Financial report.

However, the steady Systematic Investment Plan inflows and recent fall in markets opening up fresh buying avenues have kept the cash holdings under check. Part of the cash build-up can also be due to 8 equity schemes raising ₹3,955 crore through NFO last month. In January, 4 equity NFOs mopped up ₹806 crore.

SIPs hold fort

The inflows through SIP in last 11 months of this fiscal was up 10 per cent at ₹317,502 crore against ₹289,352 crore logged in the whole of FY’25.

Akshat Garg, Head - Research & Product at Choice Wealth said that less than 5 per cent cash holding of MFs does not necessarily mean that there are no redemption pressure but it is simply under the manageable limits.

“If there was real stress in the system, cash levels would have moved up sharply as fund managers prepared for outflows. That is clearly not happening right now,” he added.

The MF ecosystem is heavily supported by consistent SIP inflows, which continue to remain strong even during volatile phases and the steady inflows act as a natural counterbalance to redemptions, allowing fund managers to manage liquidity without holding excessive cash, said Garg.

In fact, in a falling market, holding higher cash can actually become a drag if markets rebound quickly and that is exactly why most funds prefer to remain close to fully invested, he said.

Market crash scares

The gross redemption from equity schemes has reduced to ₹36,098 crore in February against ₹41,639 crore in January. However, a consistent sharp fall in equity markets may scare new MF investors leading to higher redemptions and lower inflows.

Gibin John, Senior Investment Strategist, Geojit Investments said MFs continue to receive a strong and steady SIP inflows of around ₹29,000 to ₹30,000 crore per month, providing consistent liquidity support and reduces the need for holding higher cash.

Despite the huge volatility and recent meltdown in markets, the overall equity asset under management has increased 16 per cent to ₹35.39 lakh crore in February against ₹30.57 lakh crore in April, 2025.

However, the numbers in March will be crucial as the Sensex has already fallen 7 per cent so far this month to 74,533 points on Friday from 80,239 points on March 2. Signs of ending West Asia war will dictate the markets and fate of MF industry going ahead.

Published on March 21, 2026