How Did Equity MFs Reduce Cash Holdings in June?
Click to start listening
Synopsis
In June, equity mutual funds made a bold move by significantly lowering their cash holdings, reflecting a revitalization of market confidence. This trend, highlighted by a drop in cash-to-assets ratio, indicates a strategic shift in investment approaches.
Key Takeaways
- 62% of equity mutual funds reduced cash holdings in June.
- Cash-to-assets ratio fell to 3.09%.
- Nearly Rs 15,000 crore more invested in stocks monthly.
- Small caps saw significant inflows, totaling Rs 21,730 crore.
- Large caps received Rs 40,775 crore, focusing on risk-adjusted strategies.
Mumbai, July 15 (NationPress) Equity mutual funds have notably diminished their cash holdings in June, signaling a revival in market confidence, as per recent data. The average cash-to-assets under management (AUM) ratio dropped from 3.56% in May to a 12-month low of 3.09% last month, according to the Prime MF Database.
In numerical terms, mutual funds invested nearly Rs 15,000 crore more in stocks each month, reducing the total amount across all schemes from Rs 1.65 lakh crore in May to Rs 1.5 lakh crore in June.
About 62% of active equity mutual funds lowered their cash holdings, up from 60% the previous month.
Following this trend, Motilal Oswal Mutual Fund cut its cash holdings by over Rs 6,500 crore and halved its cash-on-hand ratio.
Furthermore, PPFAS and Axis Mutual Fund decreased cash reserves by Rs 1,500 crore and Rs 2,300 crore, respectively.
Large asset managers such as Kotak Mahindra, HDFC, Franklin Templeton, and Sundaram Mutual Fund also scaled back their cash exposure, the database noted.
However, ICICI Prudential slightly increased its overall ratio despite adding Rs 1,786 crore in cash. Some AMCs went against the trend, with PGIM India nearly doubling its cash reserves to Rs 1,110 crore, raising its cash-to-AUM ratio to 5%, while SBI Mutual Fund increased its cash holdings by Rs 1,092 crore.
Other firms like WhiteOak Capital, Mirae Asset, and Baroda BNP Paribas also raised their cash levels; these actions do not necessarily indicate a bear market.
On the investment front, mutual funds dramatically increased their stock purchases, expanding their portfolios with 695 new stocks.
Small caps contributed the majority of new additions, with 558 namesRs 21,730 crore. Fresh purchases of mid-cap stocks totaled Rs 35,116 crore, focusing on high-quality growth companies. Large caps received the largest allocation at Rs 40,775 crore, demonstrating a risk-adjusted deployment strategy, although they accounted for only 8% of the new additions, according to the data.
Point of View
Suggesting that fund managers are aligning their strategies to capitalize on potential opportunities in the equity markets. As we observe these shifts, it remains crucial for investors to stay informed and adapt to the evolving market dynamics.
NationPress
16/07/2025
Frequently Asked Questions
What is the significance of the cash-to-assets ratio?
The cash-to-assets ratio indicates how much cash mutual funds are holding relative to their total assets. A lower ratio suggests increased investment in equities, reflecting confidence in market conditions.
Which mutual funds reduced their cash holdings the most?
Motilal Oswal Mutual Fund led the way by reducing its cash holdings by over Rs 6,500 crore, followed by Axis Mutual Fund and PPFAS, which decreased their cash holdings significantly.
What does a decrease in cash holdings indicate?
A decrease in cash holdings typically indicates that fund managers are optimistic about market conditions and are investing more in stocks rather than keeping cash on hand.
