In November 2024, mutual funds held cash equivalent to 5.7 percent of their equity assets under management (AUM). By April 2025, this figure had risen to 7 percent, with total cash levels reaching a record Rs. 2.15 lakh crore.
Among the major fund houses, SBI Mutual Fund holds the highest cash level at Rs. 36,000 crore, followed by ICICI Prudential with Rs. 28,000 crore and HDFC Mutual Fund with Rs. 25,000 crore.
In terms of cash as a percentage of equity assets, PPFAS leads with the highest allocation at 23.60 percent, followed by Motilal Oswal at 17.50 percent and Quant Mutual Fund at 13 percent. Among larger fund houses, SBI holds 10 percent, Axis Mutual Fund 8.60 percent, ICICI Prudential Mutual Fund 8.20 percent, and HDFC Mutual Fund 7.50 percent.
The head of Equity at Axis Mutual Fund stated that their Cash holding are guided by valuations rather than market movements. He explained that cash levels reflect a balance between managing excessive valuation risks in high-growth stocks and low-growth risks in undervalued ones. He further stated that if the fund gets the right ideas, they will continue to deploy the Cash.
Mirae Asset Mutual Fund avoids cash calls entirely, believing such decisions should be made by investors at the asset allocation level. They prefer to manage risk by adjusting stock or sector weights, as timing cash calls can lead to missed market recoveries.
How High Cash Level Helps the Market
High cash levels held by domestic institutional investors (DIIs), such as mutual funds, can provide a cushion to the market during periods of decline. When markets fall, DIIs with substantial cash reserves have the flexibility to deploy funds and buy quality stocks at lower valuations, which can help stabilise prices and reduce the intensity of the downturn.
Additionally, high cash holdings act as a buffer, allowing fund managers to avoid forced selling during volatile periods. Further, Investors should also keep in mind that significantly high cash levels mean that funds are in anticipation of better buying opportunities and lack attractive investment ideas at current market levels.
Written By Abhishek Das
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