Active equities funds continued to sit on cash piles in October, with cash holdings as a proportion of category assets reaching 4.91%, the highest level since May 2023, according to Prime Database MF.

As of October 31, active equities mutual funds had a combined assets under management (AUM) of approximately Rs 30 lakh crore crore. The fund categories include active multi-cap, large-cap, big & mid-cap, mid-cap, small-cap, dividend yield, contra, value, focused, sectoral/thematic, ELSS, and flexi-cap schemes.

On an absolute basis, however, the cash holdings of all active equities funds fell to Rs 1,46,957 crore at the end of October 2024, down from Rs 1,47,588 crore the month before. This demonstrates that mutual funds were purchasin opportunities at cheaper prices while keeping some of the powder dry for future purchases.

Data also indicated that overall cash holdings as a percentage of industry AUM increased to 5.64 percent, or Rs 3.77 lakh crore, at the end of October. This statistic encompasses debt, hybrid, equity, commodities, offshore, and passive fund categories.

At Rs 3.77 lakh crore, the mutual fund industry’s overall cash holding was highest since February 2022, when it was Rs 4.19 lakh crore. The rise in cash holdings by mutual fund houses has come amid weakness in equity markets. Indian indices ended lower for the sixth consecutive session on November 14, with Nifty below 23,550. Sensex fell 0.14 percent to 77,580.31

Foreign institutional investors (FIIs) have dominated the selling in Indian equities markets over the last one and a half months, while domestic institutional investors (DIIs), particularly mutual funds, have been purchasing.

"As a percentage, the cash component continues to move even when funds are inactive. Assume my cash is 10% and my stocks are 90%. If stocks fall by 10%, as the Nifty has done, the stock value falls while the cash remains constant. However, as a percentage, it may appear higher," said Rajeev Thakkar, Chief Investment Officer at PPFAS Mutual Fund. Experts also think that while institutions have been attempting to play it smart, retail investors clearly intend to put more money into the equities markets.

Inflows into equity funds increased by 22% month over month (MoM) to Rs 41,887 crore in October. As investors boosted their wagers amidst the month's gloomy market trend, mutual fund contributions made through monthly systematic investment plans (SIPs) crossed the Rs 25,000-crore threshold for the first time.

"Institutions want to hold onto some more dry powder before they deploy, but retail is committing a lot of capital," said Nirav Karkera, Head of Research at Fisdom. Karkera thinks that a substantial deployment is taking place with the remaining money in addition to cash holdings. Experts also think that while institutions have been attempting to play it smart, retail investors clearly intend to put more money into the equities markets.

Inflows into equity funds increased by 22% month over month (MoM) to Rs 41,887 crore in October. As investors boosted their wagers amidst the month's gloomy market trend, mutual fund contributions made through monthly systematic investment plans (SIPs) crossed the Rs 25,000-crore threshold for the first time.
"Institutions want to hold onto some more dry powder before they deploy, but retail is committing a lot of capital," said Nirav Karkera, Head of Research at Fisdom. Karkera thinks that a substantial deployment is taking place with the remaining money in addition to cash holdings.

As a proportion of plan category AUM, PPFAS MF active funds held 15.46 percent, or Rs 13,255 crore, in cash holdings, the most of all major fund firms. In addition, Quant MF's active equity funds held cash holdings of Rs 6,149 crore, or 7% of scheme category AUM.