Mutual fund cash levels drop 12% to Rs 1.86 lakh crore, hit 16-month low in March amid aggressive equity buying

Synopsis

Mutual funds significantly reduced their cash holdings in March. This move indicates fund managers actively invested in the market during a period of correction. Despite global uncertainties, this strategy aimed to leverage potential investment opportunities. Several asset management companies deployed substantial cash reserves. This shift reflects a proactive approach to market dynamics.

With benchmark indices Nifty 50 and BSE Sensex remaining volatile in March and closing about 11% lower, mutual fund houses accelerated cash deployment to capitalise on the correction, even as geopolitical tensions and rising crude oil prices continued to weigh on market sentiment.

According to the data by ACE MF, the mutual fund cash holding declined to a 16-month low at Rs 1.86 lakh crore in March, down Rs 24,184 crore on a monthly basis from Rs 2.09 lakh crore in February. In percentage terms, the cash holdings declined 12% on a monthly basis.

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As a percentage of total AUM, the cash allocation was recorded at 4.72% in March, a fourth-month low level. In February, the cash allocation as a percentage of total AUM was 4.89%. The total equity AUM was recorded at Rs 39.25 lakh crore.

The data further showed that out of 49 asset management companies (AMCs), 29 AMCs deployed cash in the market or utilised their cash reserves to buy equities during the market correction in March.

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Deployed cash

Aditya Birla Sun Life Mutual Fund had Rs 2,484 crore cash in its portfolio in March compared to Rs 3,776 crore cash in February. Bank of India Mutual Fund, which had Rs 1,502 crore cash in its portfolio in February, deployed the cash in the market and brought down the allocation to Rs 512 crore in March.

HDFC Mutual Fund had Rs 21,352 crore cash in its portfolio in March compared to Rs 23,578 crore in the previous month. ICICI Prudential Mutual Fund had Rs 17,289 crore cash in the portfolio.

Mahindra Manulife Mutual Fund reduced the cash allocation to Rs 982 crore in March compared to Rs 1,358 crore in the previous month.

PPFAS Mutual Fund marginally reduced its cash allocation to Rs 29,327 crore in March compared to Rs 29,740 crore in February. Quant Mutual Fund also reduced the cash allocation to Rs 10,004 crore in March against Rs 13,005 crore in February.

SBI Mutual Fund, the largest fund house based on the assets managed, had Rs 27,463 crore cash in its portfolio. In February, it had Rs 34,704 crore cash.

Increased cash allocation

Around 20 AMCs increased their cash allocation. Abakkus Mutual Fund, led by Sunil Singhania, had Rs 486 crore cash in its portfolio in March compared to Rs 208 crore in February. Capitalmind Mutual Fund increased its cash allocation from Rs 96 crore in February to Rs 125 crore in March.

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JioBlackRock Mutual Fund increased the cash allocation to Rs 32.99 crore in March compared to Rs 18.51 crore in February. Nippon India Mutual Fund increased the cash allocation by Rs 1,652 crore on a monthly basis to Rs 7,811 crore in March, compared to Rs 6,158 crore in February.

Cash levels

Around six AMCs had over Rs 10,000 crore cash in their portfolio in March, and PPFAS Mutual Fund had the highest cash of Rs 29,327 crore, which was 21.76% of the total AUM. This was followed by SBI Mutual Fund, which had Rs 27,463 crore cash in the portfolio.

Zerodha Mutual Fund had the lowest amount of cash in the portfolio in March, at around Rs 0.19 crore.

Fund managers are allowed to keep a part of their portfolio in cash to meet events like redemptions or make investments when they see a possible opportunity in the market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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