Indian mutual funds significantly bolstered their cash reserves in October, adding Rs 10,000 crore to their portfolios in a single month. This move pushed their total cash allocation to a substantial Rs 2.09 lakh crore, up from Rs 1.99 lakh crore in September, as fund managers maintain high liquidity to navigate market conditions and prepare for new opportunities.
The increase in cash holdings means that liquid assets now represent 4.94% of the industry’s total assets under management (AUM), a slight increase from 4.92% in September. This defensive positioning occurred even as equity AUM itself expanded significantly, growing by Rs 1.86 lakh crore to reach Rs 42.30 lakh crore, indicating that new money is still flowing into the market.
Among the 48 fund houses, five held cash balances exceeding Rs 10,000 crore. ICICI Prudential Mutual Fund led the pack, holding the highest cash allocation at Rs 32,823 crore (6.53% of its AUM), a significant jump from its Rs 25,571 crore in September. The industry’s largest fund house, SBI Mutual Fund, saw a marginal increase in its cash, ending October with Rs 31,912 crore, or 4.19% of its AUM.
Other major players also increased their cash positions. HDFC Mutual Fund held Rs 28,739 crore, and Quant Mutual Fund had Rs 10,366 crore. PPFAS Mutual Fund, which increased its cash to Rs 29,167 crore, noted in a statement that it holds 25.31% in cash, debt, and arbitrage positions, ready to “deploy in long-term investments at appropriate levels.”
This strategy of holding significant cash, which can be used to manage redemptions or seize investment opportunities, is not universal. Some fund houses, like Invesco Mutual Fund, stated they “generally do not take cash calls” and “prefer to be fully invested,” typically holding only 2-3% in cash. Similarly, Samir Arora of Helios Mutual Fund noted they “do not hold any cash mostly,” as their long-short strategy means “cash is not part of the game.”
