Many mutual fund houses increased their cash holdings during April at a time when the ceasefire announcement led to a rally in the overall markets. Twenty-eight fund houses increased their holdings by Rs 14,540.63 crore, according to data shared by PrimeMF database. The cash levels include cash and equivalent securities, cash margin, CBLO/reverse repo and other receivables of the fund houses.
At the same time, the Sensex and Nifty rose 6.9% and 7.5%, respectively. Even the broader markets did remarkably well with the BSE Midcap and BSE Smallcap jumping 13.81% and 19.61%, respectively.
ICICI Prudential Leads
ICICI Prudential Mutual Fund increased its cash levels the most in April by Rs 5,557 crore. DSP Mutual Fund, HDFC Mutual Fund and SBI Mutual Fund also substantially increased their cash holdings by Rs 3,131 crore, Rs 2,432 crore and Rs 2,021 crore, respectively.
However, 20 fund houses reduced cash holdings. These include Axis Mutual Fund, which deployed the maximum amount at Rs 3,844 crore. HSBC Mutual Fund, Kotak Mahindra Mutual Fund, Samco Mutual Fund and PPFAS Mutual Fund also deployed cash in excess of Rs 500 crore during the month.
The overall cash holding of the mutual fund industry increased from 2.55% to 2.57% of the total equity assets in April.
Tactical Caution
Aparna Shanker, CIO – equity, The Wealth Company Mutual Fund believes that the rise in cash holdings across the mutual fund industry in April reflects a combination of tactical caution and selective opportunity creation rather than a broad risk-off stance.
Shankar added that the divergence in cash holdings among AMCs is understandable. Some fund houses preferred to raise cash buffers to navigate near-term volatility and maintain flexibility for better entry points, while others continued deploying capital where earnings visibility and valuation comfort remain favourable.