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Cash levels at equity mutual funds continue to remain high

Equity schemes have seen inflows of more than Rs 10,000 cr each in April and May

Chandan Kishore Kant 

mutual funds
Illustration: Ajay Mohanty

Cash levels at equity (MFs) continue to remain high, amid stocks hovering near their record highs. Against Rs 36,000 crore of the cash component in April, May witnessed a slight rise in absolute cash levels to Rs 36,300 crore. In percentage terms, however, cash levels (as a percentage of total equity assets) fell eight basis points (bps). 

Notably, have seen inflows of more than Rs 10,000 crore each in April and May. Flushed with liquidity, are facing difficulties in deploying the cash, as stock prices remain elevated. This has resulted in a sustained pile-up in cash at most fund houses. 

Though some of the fund houses invested more cash into stocks in May, it was not enough to reduce cash substantially.  For example, Mutual Fund brought its cash levels down by 40 bps in May compared with April. Likewise, MF reduced its cash level by 50 bps, while Mutual Fund cut cash composition by 100 bps. 

ICICI Prudential MF and Birla Sun Life MF also increased cash positions by 50 bps and 70 bps, respectively.

Fund houses that cut cash positions include Axis Mutual Fund, MF and Kotak Mutual Fund. Mutual Fund is the only fund house among the majors which has one of its lowest cash levels, at 2.6 per cent. 

are hesitating to get into the mid-cap and small-cap space. Most of the money is chasing the large-cap names. However, with earnings flat for the past couple of years and implementation of the (GST) just a few days away, they are taking no chances. A majority of them expect some disruption due to the implementation of the GST, and see the pain last for one or two quarters. 

Meanwhile, fund houses are pushing for balanced funds — schemes that invest in part debt and part equity — on a large scale to Within these funds, the ones with dynamic asset allocation have emerged the favourite among over the past year.

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First Published: Tue, June 20 2017. 23:42 IST
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