New Delhi: Awaiting the right opportunity to deploy their funds into the equity market, the mutual fund industry is sitting on a huge cash pile of Rs20,109 crore, even as foreign institutional investors (FIIs) are pouring funds into equities.
“The fund houses are waiting for the desired correction to take place as there is a gap in the market right now. MFs plan to enter the market when the fundamentals are good,” Taurus Mutual Fund managing director R K Gupta said.
According to Mutual Fund Monthly Performance Report by Reliance Money, the fund houses were sitting on a cash pile of Rs20,108.92 crore at the end of April, 2009.
Sitting on a huge cash pile, the fund houses are well equipped to maintain buying interest in equities and propel the market forward, analysts said.
“The surplus cash with the MFs will get absorbed very soon as the equity schemes are the best way to maximize returns of the fund houses. Going forward they would cash in on the rock-bottom valuations in the equities,” Gupta added.
Marketmen said fund houses were waiting for a correction post the general elections, however, the market went up after the decisive verdict in the polls. This led fund houses to seek more time for deploying their cash resources.
In April, FIIs invested a net Rs6,508 crore in equities while MFs made net purchases to the tune of Rs38.90 crore.
At the end of April, Reliance Mutual Fund’s cash as a percentage of its total equity assets was the highest at over 27.58%. The ratio was 20.86% for ICICI Prudential Asset Management, 16.42% for UTI Mutual Fund and 7.66% for HDFC Mutual Fund, the report noted.
Besides, an analysis of the buying trend of the MFs in April shows that the fund houses have increased their exposure substantially in the banks, real estate and power sectors, while they have reduced their holding in petrochemical, pharmaceutical and auto sectors.
The top five sector held by the MFs at the end of April was banks, pharmaceuticals petrochemicals, computers - software, electrical equipment and power.
At the end of April, the combined average Assets Under Management (AUM) of the 35 fund houses in the country increased to Rs5,51,299.95 crore, an increase of Rs58,013 crore, or 12% which analysts believe was mainly due to the recovery in equity markets and investment by banks.