Cash levels are rising in equity mutual funds as a perception is gaining ground that the stock market could be over-heated.
However, no consolidated dataa is available on how much cash the mutual funds are sitting on right now, though a steady gush of money is moving into equity mutual funds, going by the monthly data of Amfi, the nodal association of mutual funds.
The discussions Financial Chronicle had with several mutual funds house officials gives an idea that equity and balanced mutual funds are maintaining cash levels between 5 per cent and 15 per cent, depending on each fund house’s cash holding policy.
Jimmy Patel, chief executive officer, Quantum Mutual Fund, said, “Till few days back we were having 15 per cent cash in the equity mutual fund, it has been gradually increasing. A year back also we built in cash when the market was looking overheated.”
“This year other mutual fund houses have also raised their cash levels, and it’s more than last year’s,” Patel said.
Amfi data for May 2017 shows equity funds, including equity linked savings scheme (ELSS), received Rs 10,739 crore inflows last month. This apart, as much as Rs 7,663 crore came into balanced funds, of which close to 65 per cent may get allocated to equities in a risk-taking market scenario.
Against such inflows, mutual funds have invested Rs 6,581.76 crore in equities until June 22, according to Sebi mutual fund monthly equity investment data, indicating fund managers are withholding fresh inflows rather than deploying them in equities.
According to a top corporate promoted fund house official, it is becoming harder by the day to deploy cash in equities, and deployment has come down drastically in the absence of good buying opportunities.
The bigger fund houses were holding cash in specific equity funds, fearing a looming correction in the stocks in their portfolios.
HDFC Small-cap Fund with asset under management (AUM) of Rs 1,098.71 crore had cash and cash equivalent of 6.91 per cent as on May 31. HDFC Mid-cap Opportunities Fund with AUM of Rs 16,605.80 crore had a cash level of 4.21 per cent. HDFC Balanced Fund with AUM of Rs 11,748.42 crore had a cash level of 7.13 per cent.
ICICI Prudential Mutual Fund, another large fund house, has been holding back some cash. ICICI Prudential Focused Bluechip Equity Fund with AUM of Rs 13,281.72 crore had a cash level of 5.47 per cent, held in short-term debt and net cash. ICICI Prudential FMCG Fund had a cash level of 7.94 per cent as on May 31, also ICICI Value Discovery Fund maintained 7.01 per cent in short-term debt and net cash. ICICI Prudential Equity Income Fund had a cash level of 11.12 per cent.
“We do not take cash calls in our funds barring in those funds where there is a mandate,” said an ICICI Prudential Mutual Fund official.
But some fund houses have reduced cash levels too in May. PPFAS Mutual Fund, which has only one fund having AUM of Rs 774.07 crore with 66.22 per cent invested in Indian equities and 27.17 per cent in foreign equities, had 6.61 per cent in cash equivalents, CBLO and fixed deposits, as per the May 2017 fact sheet. However, the cash level was lower than April’s 8.18 per cent and March’s 7.43 per cent.
raviranjan@mydigitalfc.com