Foxed by market volatility, MFs hold cash to invest when the market dips

Experts say taking large cash calls can also put equity schemes at risk of underperformance, if markets bounce back instead of seeing further deep corrections

Heightened market volatility has put several fund managers in a dilemma, with industry estimates showing cash levels in several equity funds rising 10-30 per cent in March.

According to industry participants, certain fund managers are betting on markets to correct further, and deploying funds at lower price points. At an aggregate level, of the Rs 1.15-trillion asset base of large-cap funds as on March 31, 2020, about 5.7 per cent was held in cash and cash equivalents. Cash levels rose 160 basis points (bps), from 4.1 per cent in February.

In large- and mid-cap funds, cash levels have inched higher by 130