As investors continue to pour money into stocks and equity funds, asset managers are raising more cash in their portfolios. February month data shows that the total cash pile at equity mutual funds rose for the second consecutive month to 4.82% of total assets under management (AUM) at Rs 1.33 lakh crore.
SBI Mutual Fund was sitting at a war chest of Rs 25,100 crore and ICICI Prudential AMC Rs 21,700 crore. HDFC Mutual Fund’s cash pile of nearly Rs 19,000 crore is about 6.8% of its AUM, shows data pulled from ACE Equity.
Among major fund houses, PPFAS and Quant are among the most conservative ones when it comes to hoarding cash. PPFAS’ Rs 7,700 crore cash pile is worth about 12% of its AUM while Quant’s sack of Rs 7,100 crore is about 12.7% of AUM.
Dalal Street’s newer fund houses – Bajaj Finserv MF, Old Bridge MF and Samco MF – had the highest cash pile in AUM percentage terms.
Earlier in November, MFs were sitting on a cash pile worth 5% of their AUM which went down to 4.2% in December, only to rise to 4.36% in January and 4.82% in February.
Not just Indian mutual fund managers, even the legendary Warren Buffett is struggling to find value in a booming market. Berkshire Hathaway’s treasure trove has grown to all-time high of $168 billion with Buffett admitting that the cash holding is far in excess of what conventional wisdom deems necessary.
Also read | Warren Buffett’s $168 billion piggy bank outsizes market value of any Indian bank, LIC
Back on Dalal Street, the portfolios of mutual funds, especially in smallcap and midcap segments, are in the spotlight following Sebi’s order to release reports of stress tests to see if they can manage huge redemptions in the event of a market downturn.
The results show that large schemes like those of SBI Mutual Fund can take up to 60 days to liquidate portfolios while the smaller ones can do it as soon as in one day.
DSP said its smallcap fund has about 7% cash while the midcap one had 5.5% cash.
“We may increase cash in the scheme to further help improve our liquidity profile and will continue to be true to the label. Our mid-month cash position is better than the February 2024 end position and will further increase by March 2024,” it said.
Also read | Little stocks in big trouble! 374 smallcaps fall at least 30% from peak. Worst ahead?
For those sitting on cash, expensive valuations in a booming market is the biggest headache.
Motilal Oswal Mutual Fund’s Prashant Joshi says smallcaps are in the process of settling in a premium band just like midcaps already have settled into. Sebi’s nudge, he said, has already brought the premium of smallcaps and midcaps to acceptable levels in a short span.
“Largecaps in any case are available at reasonable valuations of 22.70 on TTMPE and have only recently begun to strengthen and lead markets after a lacklustre 2023. High earnings growth estimates, participation in market favoured themes and dedicated investment flows makes a continued case for investment into mid & smallcap funds,” he said.
(Data: Surbhi Khanna)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
