Mumbai: Mutual funds are sitting on a huge cash pile of Rs22,908 crore, which is well placed to maintain buying interest and propel the sagging market forward, a report said.
“The total cash with MFs, including cash mobilised through the recently launched NFOs to the tune of Rs6,266 crore, stands at a healthy Rs22,908 crore. Flush with cash, MFs are well placed to maintain buying interest and propel the market forward,” Sharekhan research analyst Mallika Baheti said in a research report here.
The absolute cash levels for all existing equity funds rose by 17.4% to Rs16,642 crore in February 2008 from Rs14,176 crore in January 2008. Even the cash as a percentage of the total corpus increased to 8.7% in January 2008 from 7.6% in December 2007.
Rising cash levels indicate the cautious outlook of fund managers in the wake of concerns of a global slowdown and consequent dip in foreign inflows into emerging markets such as India, Baheti said.
The cash level for all funds more than three months old also showed a similar trend, rising to 8.2% of the total corpus in February 2008 (from 7.6% of the total corpus in December 2007). This once again reflects the cautious stance adopted by MFs.
The equity fund flow analysis showed that after witnessing record inflows in January, net inflows into equity MFs more than halved to Rs6,903 crore in February as compared to Rs14,070 crore recorded in January.
The sharp fall in the overall fund flow was due to the dramatic 54% reduction in amounts flowing into existing schemes coupled with a 38% drop in the amount mobilised through NFOs.
Looking at the performance of sector funds, the analysis showed that in line with the fall in equity markets, most sector funds have generated negative returns in February, continuing the trend seen in January.
Pharmaceuticals, being a defensive sector, was the only fund category to have generated positive returns in a declining market.
Whereas automobile, pharmaceutical and information technology funds outperformed the Sensex, funds in the banking and FMCG sectors under-performed the Sensex. Additionally, automobile, FMCG, pharmaceutical and technology funds under-performed their respective benchmark indices, while the funds in the banking sector outperformed the BSE Bankex. Pharmaceutical funds gave the highest returns in February, followed by technology and automobile funds.
MFs turned net buyers of equities in February 2008. The AUM of equity MFs stood at Rs2,07,659 crore in February, down by 2.6% from January 2008. However, on adjusting for net inflows, the fall was steeper at 5.8%.
This was more than the market decline of approximately 2.8%.