Cash holdings rise at fund houses as markets climb

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Twenty fund houses have raised their cash holdings in the first six months of the calendar year, with the largest increase by Quant MF (19.4%) and WhiteOak Capital (12.2%), data from Value Research shows. The data is for cash holdings as a percentage of equity assets.

Eleven fund houses have cash holdings in excess of 5%. These include the likes of ICICI Prudential MF, HDFC MF and Tata MF. The first two, along with SBI MF, hold in excess of Rs 10,000 crore each in cash.

Thirty seven equity schemes held cash in excess of 10% of their assets. This included mostly thematic and mid- and small-cap schemes.

Some of the schemes with high cash holdings in percentage terms include

HDFC Defence Fund, Quant Quantamental Fund, Quant Large Cap Fund, ITI Focused Equity Fund, Quant Flexi Cap Fund, Quant Focused Fund, Quant Large and Mid Cap Fund, Baroda BNP Paribas Value Fund, Quant Mid Cap Fund, Quant ESG Equity Fund and ICICI Prudential Thematic Advantage Fund (FOF).

Equity schemes saw inflows of `65,000 crore this year despite market volatility and bouts of correction. This was on the back of steady flows by way of SIPs averaging more than Rs 13,000 crore per month.

Equity schemes have not been taking too many cash calls in the past few years. It is expected that investors and advisors will do their asset allocation before investing in such schemes, according to experts.

14Cash MF holding
Cash holdings rise at fund houses as markets climb 10

The decision to increase cash goes against the fundamental tenet of staying invested at all times, but is employed either to protect the downside in the event the market falls or to avoid paying a high price for a stock. Most equity schemes don’t typically take active cash calls on the assumption that investors have done their asset allocation and want to remain fully invested.

Taking large cash calls has backfired in the past. Fund managers sitting on high cash in 2008, for instance, were caught off guard when the markets rebounded in 2009.

Nifty has staged a sharp rally since March to hit a fresh all-time high above 19,000, as FPIs continued to invest in India, with China macros continuing to disappoint. Analysts believe that real interest rates have now turned reasonably positive and should likely act as a barrier for further interest rate hikes, which in turn could provide downside support to market valuations.

“Though the mid- and small-cap space provide a powerful opportunity on the strength of the domestic economy, we expect the present rally to encompass larger swathes of the market in the coming quarters, thereby increasing the attractiveness of the flexicap/large cap segments as well. We continue to emphasise that India equity is slowly but surely becoming one of the best investment destinations when seen from a 3-5 year time scale,” said a recent note by Invesco Asset Management (India).


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