Mutual funds sitting on cash pile

Mutual funds are sitting on a huge cash pile of over Rs 12,000 crore, awaiting right market situation to deploy the funds and in turn protecting investors from any sharp losses due to market downturn.

An analysis of the equity and cash allocations of equity diversified funds shows cash piles have increased steadily from 10 percent in April to over 14 percent at the end of August.

"Exposure in equities as an asset class to the total market value of the funds has decreased from 86 percent in July to 85.5 percent in August, while cash holdings have increased by 48 basis points to 14.53 percent in August," brokerage firm HDFC Securities' report analysing equity moves of fund houses stated.



The allocations to cash in the past four months have increased from 10.70 percent in April to 11.97 percent in May and from 13.80 percent in June to 14.05 percent in July, the report showed.



The total net asset value (market value) of these funds has also decreased sharply to Rs 86,953.29 crore in August from Rs 98,912.01 crore in April, this year.

"Domestic mutual funds that have been trying to provide some support to the Indian markets by bottom fishing kept away from the volatile equity markets during the month of August," the report said.

"The cash piles are well placed to maintain buying interest and propel the sagging market forward," an official from a leading fund house said.

Investors showed a greater propensity for debt oriented funds including Fixed Maturity Plans, the report added.