Despite a slowdown in investments by mutual funds over the past three months, their total holdings or assets under custody (AUC) in equities have staged a strong rebound, nearing the record highs last seen seven months ago. This recovery has been largely driven by the resurgence in Indian equity markets.
As of April, the AUC stood at Rs 43.74 lakh crore, reflecting an 11.55 percent increase from the February low of Rs 39.21 lakh crore - a nine-month low. MFs’ share in equity ownership by value has touched an all-time high of 10.33 percent. The previous peak in AUC was recorded in September 2024 at Rs 44.16 lakh crore.
This recovery in AUC is particularly notable given the sharp decline in mutual fund investments in domestic equities during March and April, when average monthly flows hovered around Rs 15,000 crore. This is significantly below the 12-month average of Rs 39,000 crore.
Independent analyst Deepak Jasani said, “This reflects the current market outlook of fund managers. Cash positions are at record highs as they are refraining from fully deploying capital, viewing the market as overvalued and preferring to wait for more opportune entry points.”
Aggregate cash holdings rose to a record Rs 1.52 lakh crore in April, up from Rs 1.46 lakh crore in February.
The recent surge in AUC aligns with the sharp rally in Indian equity markets since mid-April, triggered by US President Donald Trump’s announcement to pause tariffs for several countries, which spurred a return of foreign investors.
Since then, benchmark indices Sensex and Nifty have gained over 11 percent each, while the BSE MidCap and SmallCap indices have climbed more than 14 percent and 16 percent respectively.
Deven Choksey of DRChoksey FinServ attributed the slowdown in equity investments to the beginning of the financial year, which may have temporarily impacted fund availability. He also pointed to broader uncertainties, including tariff-related developments, geopolitical tensions, and possible investor redemptions, as contributing factors.
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