About 63 per cent of mutual fund houses increased cash holdings in their equity schemes in February as market volatility prompted fund managers to maintain higher liquidity, according to data from the Prime MF Database.
During the month, Indian equity markets remained under pressure, with the BSE Sensex falling 1.2 per cent and the Nifty 50 declining 0.6 per cent.
Of the 48 fund houses analysed, 30 increased their cash positions during the month while 18 reduced them. Equity mutual funds collectively held Rs 1.36 lakh crore in cash at the end of February, slightly higher than Rs 1.35 lakh crore in January.
However, as a proportion of total assets, cash allocations remained largely stable. Cash accounted for 2.62 per cent of equity assets in February, compared with 2.63 per cent in the previous month, suggesting that fund managers broadly remained invested despite volatile market conditions.
Part of the increase in cash balances was also linked to fresh inflows from new fund launches, which typically remain in cash before being deployed into equities.
During February, 21 open-ended schemes mobilised about Rs 4,979 crore, while one close-ended scheme raised Rs 378 crore, taking the total funds raised through new fund offers (NFOs) to around Rs 5,357 crore.
Equity-oriented schemes accounted for the bulk of these inflows, collecting Rs 3,955 crore. Among them, SBI Mutual Fund’s SBI Quality Fund emerged as the largest equity NFO of the month, raising Rs 2,245 crore.
Other launches included Kotak Mahindra Mutual Fund’s Kotak Services Fund, which mobilised Rs 760 crore, and Edelweiss Mutual Fund’s Financial Services Fund, which raised Rs 224 crore. Motilal Oswal Mutual Fund’s Financial Services Fund collected Rs 154 crore, while Jio BlackRock Mutual Fund’s Sector Rotation Fund mobilised Rs 98 crore.
In terms of absolute cash holdings, SBI Mutual Fund held the largest balance at Rs 26,101 crore at the end of February. It was followed by HDFC Mutual Fund with Rs 19,453 crore and ICICI Prudential Mutual Fund with Rs 15,514 crore.
Axis Mutual Fund and Kotak Mahindra Mutual Fund were also among the major cash holders, with balances of Rs 10,892 crore and Rs 4,592 crore, respectively.
Looking at monthly changes, SBI Mutual Fund added the most cash in absolute terms, increasing its holdings by Rs 4,597 crore, or about 21 per cent, during February.
At the other end of the spectrum, Samco Mutual Fund saw the steepest fall in cash allocation, with its cash ratio dropping 36.89 percentage points to 1.85 per cent in February from 38.74 per cent in January.
Capitalmind Mutual Fund reduced its cash allocation by 24.33 percentage points, bringing it down to 10.94 per cent from 35.27 per cent, while Abakkus Mutual Fund lowered its cash ratio by 9.70 percentage points to 6.08 per cent from 15.78 per cent.
The data suggests that while many fund houses chose to hold slightly higher cash levels amid market volatility, the overall allocation remained relatively stable, indicating that most fund managers continued to stay largely invested in equities.