To meet the twin objective of maintaining enough liquidity to meet sudden redemption pressures and to guard against value erosion, mutual funds have, by and large, increased their cash holdings in September.
As of now, Kothari Pioneeer is among few funds which have made full disclosures of equity portfolio on September 30, 2000. The fund's cash holdings have increased in the Bluechip Fund from 16.38 per cent in August to 22.23 per cent by the end of September.
Fund manager K N Subramanian says during September sales were effected in Ranbaxy and Zee Telefilms. During this period, the value of equity holdings also came down from Rs 189.12 crore to Rs 167.16 crore.
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Similarly, in its K P Pharma Fund, the fund manager has increased the cash position from 13 per cent in August to 18 per cent at the end of September.
According to fund manager R Sukumar, "The additional cash would be used to buy stocks at lower levels. During the month, we have reduced exposure to Ranbaxy due to valuation considerations."
Nikhil Khattau, chief executive officer, Sun F&C, says his fund does not normally exceed cash levels of five per cent because "investors want us to invest their funds and not keep them idle. We make short-term changes only if a particular story is impacted negatively. This is why in our equity funds we are more or less fully invested."
Another fund which has increased its cash position substantially is IL&FS E-com Fund which has net assets of around Rs 100 crore till September end.
The fund's cash position has gone up from 0.65 per cent in August to 2.29 per cent in September, while in its Growth and Value Fund the cash position has gone down to 0.44 per cent from 5.24 per cent, which, fund sources explained, was due to sudden redemptions towards the end of the month.
Sources in a Hong Kong-based fund maintained that the cash position was comfortable but refused to disclose actual figures. He said that there were no redemption pressures. Fresh investments, he clarified, would be taken up only after the market had bottomed out.