Mutual Funds Keep Cash Buffers Elevated In October Despite Market Rally | Savings and Investments News

Mutual Funds

Amid buoyant equity markets and renewed foreign inflows, active equity mutual funds continued to hold elevated cash buffers in October, signaling fund managers’ cautious stance despite the market’s upward momentum.

Data from ACE Equities showed that aggregate cash holdings in active equity schemes inched up to 4.11% in October from 4.10% in September. In absolute terms, cash reserves rose to ₹2.09 lakh crore from ₹1.99 lakh crore a month earlier.

This increase came even as Indian equities advanced, buoyed by foreign investors who bought over $1.6 billion worth of shares during the month, supported by optimism over a potential US–India trade deal and robust September-quarter earnings.

Market experts noted that fund managers often retain higher cash positions to navigate volatility, but such caution also reflects concerns over stretched valuations across segments. Most fund houses continue to align deployment with earnings momentum and valuation comfort, rather than taking aggressive cash calls.

Among major fund houses, ICICI Prudential Mutual Fund held the highest cash reserves at over ₹32,800 crore, representing around 6.5% of its assets under management (AUM). It was followed by SBI Mutual Fund and Parag Parekh Mutual Fund, with cash holdings of approximately ₹31,900 crore and ₹29,160 crore, accounting for 4.2% and 22.2% of their respective AUMs.

Other fund houses with sizable cash positions included HDFC Mutual Fund (₹28,740 crore), Quant Mutual Fund (₹10,366 crore), Axis Mutual Fund (₹8,486 crore), Motilal Oswal Mutual Fund (₹8,460 crore), and Nippon India Mutual Fund (₹7,024 crore).

Notably, Motilal Oswal and 360 One Mutual Funds saw sharp increases in their cash ratios — rising to 7.2% and 4.5% in October from 5.4% and 2.8% a month earlier. ICICI Prudential, Quant, and Invesco Mutual Funds also raised their cash levels to 6.5%, 11.8%, and 3.9%, respectively, compared with 5.33%, 10.9%, and 3.2% in September.

Conversely, several fund houses trimmed their cash exposure significantly. Samco Mutual Fund’s cash holdings dropped to 11.9% of AUM from 25% in September, while NJ Mutual Fund and Old Bridge Mutual Fund reduced their cash levels to 0.5% and 7.5%, respectively, from 5.5% and 10.6%.

Other fund houses, including Baroda BNP Paribas, Shriram, WhiteOak Capital, Trust, Quantum, and Groww Mutual Funds, also reported notable declines in cash holdings during the month.

Source: ACE MF