Cash at equity mutual funds witness a rise: Report

Equity mutual funds raise their cash levels amid high valuations, with some schemes holding large amounts in cash

MintGenie Team
First Published24 May 2024
Out of the 451 schemes, 24 had more than  <span class='webrupee'>₹</span>1,000 crore in cash each.
Out of the 451 schemes, 24 had more than ₹1,000 crore in cash each.

Cash levels for equity mutual funds have witnessed a rise in the past few months amid rising valuations. Total cash kept aside by equity mutual funds at the end of April rose to 1.34-lakh crore, 22 per cent higher than that at the end of December last year, reported Business Line quoting Fisdom Research data. 

As a percentage of total equity assets, cash has gone 37 basis points up to 5.42 per cent during this period.

Out of the 451 schemes, 24 had more than 1,000 crore in cash each. Fifty one schemes had cash in excess of 10 per cent and 131 schemes over 5 per cent, BL reported.

Parag Parikh Flexi Cap Fund held the maximum cash amounting to 9,457 crore, 14.8 per cent of its assets. HDFC Flexi Cap Fund, ICICI Pru Bluechip, SBI Contra, HDFC Mid-Cap Opportunities, and ICICI Pru Value Discovery held more than 5,000 crore in cash. 

Each of these mutual fund schemes have raised their cash component in the past four months.

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Nifty 50 is trading at 20.6 times its FY25 estimated earnings per share. The gauge has moved up 4 per cent in the four months to April. The market cap to GDP ratio was at 132 per cent at the end of April, much higher than the long term average of 85 per cent.

Cash calls

The call to raise cash is against the fundamental doctrine of remaining invested all the time, but is employed to either protect the downside when the market declines or to avoid paying a high price for a stock. 

Most equity schemes do not typically take active cash calls on the assumption that investors have done their asset allocation and want to remain fully invested.

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Cash calls also depend on the type of schemes under consideration. Mid and small-cap schemes, for instance, may have higher cash holdings compared with large-cap schemes as these are less liquid and high cash may prove useful during market corrections and large redemptions.

 

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