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Sharvari Patwa

Mumbai, Aug 19 Mutual funds seem to be playing safe with their cash as they continue to sit on piles of it even as the equity markets exhibited a marked improvement in July on the back of softening crude prices. The benchmark Sensex rose by more than six per cent in July.

At the end of July, mutual funds were sitting on Rs 22,131 crore of cash that is waiting to be deployed in the market. Of this, Rs 15 crore have been mobilised through NFOs while the rest lies with the existing mutual funds, according to a report by Sharekhan. In June, the mutual fund industry was sitting on Rs 22,408 crore of cash, of which Rs 465 crore were mobilised through NFOs. While the dip in the cash level is not much, analysts say it does indicate a mild optimism in the investment approach of fund managers.

“July saw the Sensex witnessing levels of 12600, and fund managers found stocks attractive at those levels. They then deployed more funds in the market,” said Mr Sanjay Sinha, Chief Investment Officer, SBI Mutual Fund.

Contrary to expectations, there was not much redemption pressure in July, so mutual fund houses raised their deployments slightly. They were holding back earlier just in case there was redemption pressure, he added.

The cash levels maintained by fund managers reflect their perception of the markets and their expectations, said Mr Dhirendra Kumar, CEO, Value Research.

While some mutual funds have shown a slight increase in deployment of cash, the rest still seems to prefer to sit on high levels of cash as a safer strategy. According to the report by Sharekhan, the top 10 funds having more cash compared with others include UTI Long Term Advantage Fund which holds cash and equivalent of 46.23 per cent; UTI Infrastructure Advantage Fund- Series I of 36.94 per cent; Sundaram BNP Paribas Growth Fund of 34.75 per cent; LIC MF Growth Fund of 33.18 per cent; ICICI Prudential Blended Plan of 31.88 per cent; Reliance Natural Resources Fund of 31.76 per cent, and Birla Sun Life Basic Industries of 31.09 per cent.

Birla Sun Life Pure Value Fund holds cash and equivalent of around 35 per cent, according to the fund’s fact-sheet.

While the mutual funds were net buyers to the tune of Rs 1,412.20 crore in July, they have turned net sellers during the first half of August at Rs 822.5 crore. The mutual funds will deploy more funds at levels they find attractive, said the head of research of a mutual fund house. It looks like they are still waiting for those appropriate levels, he added.

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