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Equity fund managers raised their cash holdings in April, amid a sharp spike in volatility and subdued outlook for equities due to weak earnings forecasts.
The cash component as a percentage of total equity assets under management (AUM) increased 50 basis points to three per cent in April, when the benchmark indices continued to slide for a second straight month.
In absolute terms, the rise was to Rs 9,626 crore in April compared with Rs 8,400 crore in March.
During the month, the BSE's benchmark index, the Sensex, hit a low of 27,215 and a high of 29,094.
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Tata Consultancy Services, Reliance Industries, YES Bank, State Bank of India and Maruti Suzuki are key stocks which saw heavy selling by fund managers. Sun Pharma, Kotak Mahindra Bank, Hero MotoCorp, Tata Motors and Infosys were some large-cap counters which saw buying.
Among the leading fund houses, HDFC Mutual Fund, Birla AMC, Franklin Templeton and SBI MF increased their cash levels. However, the other six in the top 10 reduced theirs'.
Franklin Templeton, fifth largest in equity assets, raised the cash proportion to 7.34 per cent compared with 6.2 per cent a month before. In absolute terms, Rs 1,915 crore from Rs 1,652 crore earlier.
“Raising of cash holding might not be a conscious decision. It could be a result of churning in the portfolio, amid robust inflows in the equity schemes. I believe no fund managers would take a cash call when the market is throwing buying opportunities,” said the chief investment officer (CIO) of a large fund house.
In April, fund managers had pumped one of the highest monthly investments into stocks, of Rs 9,200 crore. The net inflows were unusually strong at Rs 10,600 crore in equity-oriented schemes.
G Pradeepkumar, chief executive officer, Union KBC MF, says: “Given the strong inflows, it is not necessary that fund managers invest all the new money in the same month. There could be some lag, which leads to a higher proportion of cash.”
Most MF managers continue to remain bullish on the Indian market for the next three to five years.
Earlier, Prashant Jain, CIO at HDFC MF, had told Business Standard, “The markets have sharply underperformed nominal GDP growth over the past six years, in spite of the sharp move in recent months. The growth prospects for the Indian economy are encouraging.” As on end-April, the equity AUM was nearly Rs 3.45 lakh crore or 30 per cent of the overall sector’s.
