Liquid plans keep 20% cash to meet redemption

Debt fund managers are sitting on a cash level of around 20 per cent in their liquid plans, anticipating huge redemptions by corporates to pay advance tax and to spruce up financial results for the September quarter. They expect cash plans to witness 15-25% erosion in their assets under management. These schemes had to undergo huge redemption pressure in August too owing to the rise in call money rates. The Association of Mutual Funds in India and the Securities and Exchange Board of India are yet to detail the asset level of liquid plans in August.

As of July-end, their assets stood at Rs 1.35 trillion. As of now, there has not been any redemption.

However, fund houses expect the outflows to begin from the next week. "Liquid funds may witness 20-25% redemption across the industry," said a fund manager.

Navneet Munot, head-fixed income, Birla Sun Life Mutual Fund, said, "Around 10,000 crore is likely to be the outflow in liquid plans across the industry and many mutual funds are maintaining 15-20 per cent cash (levels) in portfolios."

According to industry estimates around Rs 30000-35000 crore is likely to be drained out from the banking system as the second installment of corporate advance tax payment, due by September 15.