MFs sitting on huge cash position

Sensing a buying opportunity following the recent fall in stock prices, most mutual fund houses have increased the cash levels of their top schemes by up to 50 per cent of the total corpus during the last one-and-a-half month.

Most of the top performing equity mutual fund schemes have an average cash level of 15 per cent, which is almost thrice the normal level maintained by them. Some schemes are even sitting on cash of up to 50 per cent of their corpus, industry sources said.

Analysts view the funds' move to garner cash by selling equities as being aimed at restructuring their portfolios by selling a few struggling scrips and picking up stocks, which could perform well in the days to come.

"Normally funds maintain around 5-6 per cent cash during the February-March period, as it is tough to take a call on the market movement. This year, the equity schemes are holding on an average 15 per cent cash, which means the fund houses had a strategy to wait for the prices to reach their expected levels," Subhash Bagaria of Angel Broking said.

Reliance Mutual Fund's Long Term Equity fund, Prudential ICICI's Equity and Derivatives Fund and SBI's Magnum Global are some of the funds which are currently sitting on huge cash.

Sanjay Sinha, equity head of SBI MF, viewed good unit sales in February as one of the reasons for the strong cash levels.

Mutual funds bought equities worth a total of Rs 12,697.09 crore in February and sold equities worth Rs 12,971.14 crore, becoming net sellers of Rs 274.05 crore.

This month, the funds have sold equities worth Rs 5,231.63 crore till March 12, while buying was restricted to Rs 4,362.35 crore. They have been net sellers of Rs 869.28 crore.