Mutual fund houses sitting on huge cash holdings; Almost double the 5-year average

Assets under management (AUM) of mutual fund companies’ equity-based schemes in terms of cash in July stood at Rs 57,045 crore, which was significantly higher than the five-year average of Rs 31,531 crores of rupees, according to a media report. It could be deployed to counter a potential sale by foreign portfolio investors.

In relative terms, July’s cash level stood at 4.03%, which was above the five-year average of around 3.58% and the two-year average of 3%, according to the report. Livemint attributing data to the Anand Rathi group. . While net inflows into equity programs fell 43% month-on-month in July, SIP inflows remained flat at Rs 12,140 crore, allowing overall equity flows to remain in territory positive.

“AMCs are holding on to cash to roll out as needed…Inflows were steady with consistent SIP numbers, implying there is positive sentiment in the market. However, these entries are not being rolled out aggressively,” the report quoted Feroze Azeez, Deputy Managing Director of Anand Rathi Wealth as saying.

Equity mutual funds attracted Rs 8,898 crore in July, down 43% from the previous month, as markets remained volatile amid concerns over inflation and rate hike expectations . For the 17th consecutive month, equity mutual funds saw inflows in July.

“There is a floor in the market from Rs 14 trillion AUM of equity funds… We can lower the current cash level by 4% to 0.5% in a cheap market, with about Rs 50,000 crore deployed from cash held by AMC in falling market,” the livemint report quoted Nilesh Shah, Managing Director and CEO of Kotak AMC, as saying.

Net inflows in July were lower than Rs 15,495 crore seen in June, Rs 18,529 crore in May and Rs 15,890 crore in April, according to data released by the Association of Mutual Funds in India (Amfi) on Monday.

Equity schemes have recorded net inflows since March 2021. These schemes recorded outflows for eight months from July 2020 to February 2021, losing Rs 46,791 crore.

All equity-focused categories received net inflows in July, with the small cap fund category being the biggest beneficiary with a net inflow of Rs 1,780 crore. This was followed by the Flexi Cap Fund which witnessed a net infusion of Rs 1,381 crore. In addition, the Large Cap Fund, Large & Mid Cap Fund, and Mid Cap Fund each recorded a net inflow of over Rs 1,000 crore.

Recently, domestic institutional investors have recorded profits even as FIIs have become net buyers of equities. In August, DIIs sold shares worth Rs 6,053 crore, even as FIIs invested Rs 51,200 crore.

REITs sold a whopping Rs 2.46 lakh crore between October 2021 and June 2022 in Indian stock markets. However, now foreign investors have turned net investors and injected Rs 49,250 crore so far in August on the back of improving corporate earnings and macroeconomic fundamentals. They invested a net amount of Rs 5,000 crore in July.

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Dolores W. Simon