Mutual Funds Maintain Elevated Cash Holdings in April Amid Market Recovery
Mutual Funds Maintain Elevated Cash Holdings Despite Market Rally
Indian mutual funds maintained a cautious stance in April, holding onto elevated cash reserves even as the markets staged a sharp rebound on easing geopolitical tensions. The combined cash holdings of mutual funds stood at Rs 1.99 lakh crore at the end of April, a Rs 13,000 crore increase from Rs 1.86 lakh crore in March.
The Indian markets posted significant gains in April, with the benchmark Sensex and Nifty rising 7 percent and 7.5 percent, respectively. Broader markets outperformed sharply, with the BSE MidCap 150 and BSE SmallCap 250 indices surging 12.7 percent and 18 percent, respectively.
According to the latest ACE Equities data, around 55 percent of mutual funds increased cash holdings in their equity schemes during April. Of the 53 fund houses analyzed, 30 raised cash holdings during the month, while 23 trimmed them.
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Analysts attribute the reluctance to deploy cash more aggressively to an underlying wariness about stretched valuations across market segments. While fund managers usually hold cash to cushion volatility, maintaining a defensive stance for too long can become a performance drag. Most fund houses are therefore choosing to align deployment with earnings visibility and valuation comfort rather than making bold cash calls.
The following table highlights the cash holdings of some of the large fund houses as a percentage of total equity assets under management:
| Fund House | April Cash Holding | March Cash Holding | Change |
|---|---|---|---|
| ICICI Prudential MF | 4.11% | 3.5% | 0.61% |
| DSP MF | 6.82% | 4.81% | 2.01% |
| HDFC MF | 5.11% | 5.08% | 0.03% |
| SBI MF | 3.92% | 3.89% | 0.03% |
| Quant MF | 14.38% | 13.8% | 0.58% |
Other fund houses that raised cash holdings during the month include Franklin Templeton, Bandhan, Aditya Birla, Tata, Canara Robeco, Sundaram, Motilal Oswal, and PGIM India.
On the other side, PPFAS MF trimmed its cash holdings as a percentage of total equity AUM to 18.7 percent in April from 21.76 percent in March. Axis MF reduced its cash holding to 7.6 percent from 9.31 percent, while Nippon India MF brought it down to 1.45 percent from 1.93 percent.
HSBC, Kotak, WhiteOak Capital, Mirae, Invesco, Baroda BNP, and Bank of India also marginally cut their cash holdings during the month.
Investor Takeaway
Mutual funds maintained elevated cash holdings in April, indicating a cautious approach to market recovery.
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