Mutual Funds Increase Cash Holdings Amid Market Volatility in February

Mutual Fund Houses Increase Cash Holdings Amid Market Volatility

In February, 63% of mutual fund houses increased their cash holdings in equity schemes, as per data from the Prime MF Database. This trend is observed among 48 fund houses analyzed, with 30 increasing their cash positions and 18 reducing them.

Rs 1.36 lakh crore in cash was held by equity mutual funds at the end of February, a marginal increase from Rs 1.35 lakh crore in January. However, as a proportion of assets, cash levels remained largely unchanged at 2.62% of equity assets in February, indicating that fund managers broadly remained invested despite volatile market conditions.

New Fund Launches Contribute to Cash Build-Up

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Fresh inflows from new fund launches during the month contributed to the cash build-up. 21 open-ended schemes mobilized about Rs 4,979 crore, while one close-ended scheme raised Rs 378 crore, taking the total funds mobilized through new fund offers (NFOs) to around Rs 5,357 crore. Equity-oriented schemes accounted for the bulk of these inflows, raising Rs 3,955 crore.

Largest Cash Balances Held by Top Fund Houses

Among fund houses, SBI Mutual Fund held the largest cash balance at Rs 26,101 crore at the end of February, followed by HDFC Mutual Fund with Rs 19,453 crore and ICICI Prudential Mutual Fund with Rs 15,514 crore.

Significant Changes in Cash Holdings

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SBI Mutual Fund added the most cash in absolute terms, increasing its holdings by Rs 4,597 crore, or about 21%, during February. Quant Mutual Fund followed with an increase of Rs 3,576 crore, representing a 219% surge from January levels. ICICI Prudential Mutual Fund also increased its cash position significantly, adding Rs 2,831 crore, a 22% rise from the previous month.

Smaller AMCs Lead in Cash Allocation

In terms of cash relative to assets, Old Bridge Mutual Fund had the highest allocation, with cash accounting for 15.48% of equity assets, followed by Bank of India Mutual Fund at 13.14% and Capitalmind Mutual Fund at 10.94%.

Notable Increases in Cash Allocation

Bank of India Mutual Fund saw the sharpest rise in cash allocation, with its cash ratio climbing 5.35 percentage points to 13.14% in February from 7.78% in January. Quant Mutual Fund followed with a 4.97 percentage point increase to 7.28% from 2.31%.