Mutual Fund Cash Hits 16-Month Low Amid Aggressive Buying in Market Fall

Mutual fund cash holdings declined to a 16-month low in March as fund houses deployed liquidity to capitalise on the recent market correction, even as geopolitical tensions and rising crude oil prices weighed on equities, according to data from Ace MF.

Data showed that total cash holdings of mutual funds fell to ₹1.86 lakh crore in March, down ₹24,319 crore or 12% from ₹2.1 lakh crore in February, according to Ace MF. Cash as a percentage of assets under management also declined to 4.73%, a four-month low, compared to 4.86% in February and 5.76% a year ago.

Nearly 60% of mutual funds utilised their cash reserves to buy equities during the correction, while the remaining fund houses either maintained or increased their cash positions, indicating a mixed but largely constructive stance.

The market downturn, driven by global uncertainties and elevated crude oil prices, saw benchmark indices BSE Sensex and Nifty 50 fall around 11.5% each. Broader indices such as BSE MidCap 150 and BSE SmallCap 250 also declined about 10%, with more than half of stocks hitting 52-week lows during the period.

Fund Houses Deploy Cash Amid Correction

Several large fund houses significantly reduced their cash holdings as they stepped up equity purchases.

SBI Mutual Fund saw its cash holdings decline to ₹27,464 crore in March from ₹34,704 crore in February. Similarly, ICICI Prudential Mutual Fund reduced cash to ₹17,290 crore from ₹23,876 crore.

Motilal Oswal Mutual Fund cut its cash holdings to ₹3,124 crore from ₹6,722 crore, while Quant Mutual Fund lowered its cash to ₹10,000 crore from ₹13,000 crore. HDFC Mutual Fund also reduced its holdings to ₹21,352 crore from ₹23,579 crore.

Other fund houses including Aditya Birla Mutual Fund, Tata Mutual Fund, Invesco, Bank of India Mutual Fund, PPFAS and DSP Mutual Fund also trimmed their cash positions during the month.

However, some fund houses chose to increase their cash buffers. Nippon India Mutual Fund raised cash holdings to ₹7,811 crore from ₹6,158 crore, while Axis Mutual Fund increased its cash to ₹16,470 crore from ₹15,296 crore.

Edelweiss Mutual Fund and others such as Baroda BNP Paribas, Canara Robeco, Abakkus and LIC Mutual Fund also reported higher cash levels, indicating selective caution amid market volatility.