Equity Mutual Funds’ Cash Holding Drops to 4-Month Low in November

The cash holding of equity mutual fund (MF) schemes fell to 5.4% in November, marking the lowest level in four months. This drop comes as net inflows into equity schemes fell 14% month-on-month, signalling cautious investor sentiment.

Recent Trends

Cash levels had peaked at 6% in September but began declining in October amid a market correction. By the end of October, cash holdings were slightly higher at 5.5%, as per a report by Motilal Oswal Financial Services.

PPFAS Mutual Fund reported the highest cash holding at 21.5%, while all other fund houses maintained less than 10% in cash within their equity schemes.

Why Cash Levels Dropped

Mutual fund managers typically aim to remain fully invested but reserve cash during uncertain market conditions or periods of high valuations. Reduced inflows, particularly from lump-sum investments and new fund offerings, influenced lower cash levels in November.

Active equity mutual fund schemes saw inflows of ₹35,943 crore in November, down 14% from ₹41,887 crore in October—the highest-ever monthly inflow.

Market Movement Impact

Changes in cash levels are also influenced by fluctuations in assets under management (AUM). A market decline can increase the cash percentage even if the cash amount remains unchanged.

The drop in cash holdings reflects ongoing market movements and moderated investor inflows, signalling cautious optimism among mutual fund managers.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.