Equity mutual fund managers opt to sit on nearly Rs 1.4 lakh crore of cash ahead of elections

The Parag Parikh Flexi Cap Fund emerged as the leader in cash reserves, holding an impressive Rs 9,457 crore in cash, which accounts for 14.8% of its assets. Other prominent funds with substantial cash holdings include HDFC Flexi Cap Fund, ICICI Pru Bluechip, SBI Contra Fund, HDFC Mid-Cap Opportunities Fund, and ICICI Pru Value Discovery Fund, each holding cash exceeding Rs 5,000 crore.

In response to escalating valuations and uncertainty in the market ahead of Lok Sabha Elections, equity mutual fund managers in a defensive approach have significantly bolstered their cash reserves in recent months. According to data from Fisdom Research quoted by Business Line, cash levels for equity mutual funds surged to Rs 1.34 lakh crore by the end of April 2024, marking a substantial 22% increase compared to December 2023 figures.

During this period, the proportion of cash relative to total equity assets saw a notable uptick, rising by 37 basis points to reach 5.42%. Within the spectrum of 451 schemes analyzed by the research firm, 24 boasted cash reserves surpassing as much as Rs 1,000 crore each. Furthermore, 51 schemes allocated more than 10% of their assets to cash, while 131 schemes maintained cash holdings exceeding 5%.

The Parag Parikh Flexi Cap Fund emerged as the leader in cash reserves, holding an impressive Rs 9,457 crore in cash, which accounts for 14.8% of its assets. Other prominent funds with substantial cash holdings include HDFC Flexi Cap Fund, ICICI Pru Bluechip, SBI Contra Fund, HDFC Mid-Cap Opportunities Fund, and ICICI Pru Value Discovery Fund, each holding cash exceeding Rs 5,000 crore.

This surge in cash reserves underscores a concerted effort by mutual fund managers to mitigate potential risks amidst elevated market valuations. Notably, each of these mutual fund schemes has incrementally raised its cash component over the past four months, signaling a deliberate shift towards defensive positioning in the face of market uncertainty.

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