Cash Holding by Mutual Funds in Equity Portfolio Drops to Lowest Level Since June

Gold Silver Reports – Mutual funds’ cash holding as a percentage of their total equity portfolio fell to the lowest in four months in October, as fund managers pumped money into a spate of public offerings.

Also, while certain sectors seemed overheated, investors hunted for other beaten-down sectors where long-term value was seen emerging.

According to data from Morningstar, mutual fund cash holding at 5.5% in October is the lowest since 5.2% in June. 

This compares with 5.7%, 6% and 5.6% in September, August and July, respectively.

In absolute terms, at Rs38,597 crore, this was the second-highest monthly cash holding.

“There have a been a couple of large issuances in the initial public offering (IPO) market, and those seem to have absorbed additional flows better,’ said Navneet Munot, chief investment officer, SBI Funds Management Pvt. Ltd.

In October, state-owned reinsurer General Insurance Corp. of India Ltd’s (GIC Re) raised Rs11,372 crore, in the second-largest IPO ever to hit the Indian capital market.

Also, Reliance Nippon Life Asset Management Ltd raised Rs1,542 crore through an IPO.

“There are rotational trades in the market. There are intra-sector rotations,’ said Gopal Agrawal, chief investment officer (equities) at Tata Asset Management Ltd.

“Certain sectors are turning attractive, and people are deploying more cash there. For example, the IT and telecom sector has attracted investor interest in recent times,” added Agrawal.

BSE telecom index was the best performing sectoral index in October, gaining 19.54%, while BSE IT index gained 4.18% during the month, significantly contributing to its total 2017 gains of 6.94%.

BSE healthcare index, which is the only index to dip so far this year, added 5.89% in October.

“Primary market has also helped, albeit on a selective note,” he added.

Mutual funds’ assets under management (AUMs) hit a record of Rs21.4 trillion in October, as falling fixed deposit rates and rising stocks encouraged more people to put money in mutual funds.

According to data from the Association of Mutual Funds in India (Amfi) released on Tuesday, total AUMs rose nearly 5% in October helped by strong inflows in income and equity schemes.

Equity schemes’ AUM touched a record Rs7.08 trillion, up 7.4% from a month before. Net inflows into equity schemes, though lower than the previous month, were still strong at Rs16,002 crore. – Neal Bhai Reports

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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