India’s largest equity hedge fund manager is hoarding cash as its too early to call the bottom to a free fall in the nation's equity market triggered by global risk-off and local financing woes.

Avendus Capital Public Markets Alternate Strategies LLP has been unwinding its investments to raise cash holdings to the highest in several years, Vaibhav Sanghavi, who helps oversee the firm's funds as co-chief executive officer, said by phone. He declined to disclose the ratio of assets under management kept as cash.

The RBI's seizure of beleaguered Yes Bank last week intensified the risk-off mood fuelled by the spread of novel coronavirus cases across the globe. S&P BSE Sensex, the nation's benchmark equity index, fell the most since August 2015 on Monday, while a measure of volatility in local stocks surged to its highest level in more than five years, data compiled by Bloomberg show.

“The sharp market fall is more in anticipation of global demand being impacted by the coronavirus outbreak. Where does it settle? It will start stabilising once we see the peak of the epidemic cycle followed by tapering of infected cases,” Sanghavi said.

The alternate strategies business at Avendus manages more than $894 million under two of its funds, of which the three-year-old Avendus Absolute Return Fund is the nations largest by assets under management.

“The risk-reward ratio doesn’t warrant a sell yet, and we would look for opportunities to buy. But the immediate volatility has led us to go into cash,” Sanghavi said.

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