Mutual Funds Increase Cash Holdings in April Despite Recovery in Equity Markets

Mutual funds increased their cash positions during April despite a recovery in Indian equity markets and improved investor sentiment. 

Industry cash holdings rose by ₹12,726 crore to ₹1.98 lakh crore after declining sharply in March, when fund managers had reduced cash levels to a 16-month low, as per The Economic Times report.

Cash Holdings Rise After Sharp Decline in March

Mutual fund cash allocations increased to ₹1.98 lakh crore in April from ₹1.86 lakh crore in March. In the previous month, cash holdings had fallen by ₹24,184 crore on a month-on-month basis from ₹2.09 lakh crore recorded in February.

The increase in cash balances during April came after a period of stronger equity market performance, suggesting that some fund managers preferred to maintain additional liquidity despite improving market conditions.

Equity Markets Record Gains During April

Indian benchmark indices witnessed a recovery during the month. The Nifty 50 gained 6.60%, while the BSE Sensex advanced 5.96% in April.

Despite the market rebound, mutual funds continued to retain a sizeable cash buffer across portfolios, reflecting selective deployment strategies and a measured investment approach.

Cash Allocation as a Share of Equity Assets

As a percentage of total equity assets under management (AUM), cash allocation stood at 4.52% in April compared with 4.72% in March. Total equity AUM for the industry was recorded at ₹43.79 lakh crore during the month.

The moderation in cash allocation percentage despite higher absolute cash holdings was largely due to the increase in overall equity asset values.

Several Fund Houses Increase Cash Positions

Among 49 fund houses that disclosed portfolio data over the past two months, 25 increased their cash allocation in April.

Read More: DSP ELSS Tax Saver Fund Announces IDCW; Record Date Set for May 14.

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Conclusion

Mutual funds increased overall cash holdings in April despite gains in Indian equity markets, indicating a cautious portfolio stance among several fund managers. While some fund houses raised liquidity levels, others continued deploying cash into equities, reflecting differing investment strategies amid evolving market conditions.

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