Mutual Funds keep cash buffers elevated in November amid market gains

Stocks to Watch Today, 15 December

Cash buffers at active equity mutual funds slipped marginally in November, still remaining elevated despite benchmark Sensex and Nifty hitting fresh highs—an indication that fund managers are still treading cautiously.

Fresh data from ACE Equities show aggregate cash holdings in active equity schemes eased to 4.68 percent in November from 4.79 percent in October. In absolute terms, however, reserves held largely steady at about Rs 2.02 lakh crore, compared with Rs 2.03 lakh crore a month earlier.

The slight pullback in cash came even as Indian equities scaled fresh record highs, buoyed by hopes of a trade pact with the US and growing conviction that global and domestic central banks may begin reducing rates in the coming months.

In November, the benchmark indices extended their winning streak, with the Sensex rising 2.11 percent and the Nifty advancing 1.87 percent. The broader market, however, delivered a more mixed performance: the BSE MidCap index edged up 0.35 percent, while the BSE SmallCap index slipped 3.4 percent, reflecting selective investor appetite amid stretched valuations.

Analysts say the reluctance to deploy cash more aggressively reflects an underlying wariness about stretched valuations across market segments. While fund managers usually hold cash to cushion volatility, maintaining a defensive stance for too long can become a performance drag. Most fund houses are therefore choosing to align deployment with earnings visibility and valuation comfort rather than making bold cash calls.

Among large fund houses, SBI Mutual Fund, Parag Parikh, ICICI Prudential and Motilal Oswal trimmed their cash positions slightly in November.

SBI MF reduced cash to 3.89 percent of its equity assets, down from 4.2 percent in October. Parag Parikh MF lowered its buffer to 21.37 percent, though it remained elevated relative to 22.17 percent a month ago.

ICICI Prudential pared cash to 5.01 percent from 5.33 percent, while Motilal Oswal and Nippon India MF cut their cushions to 6.52 percent and 1.65 percent, respectively, compared with 7.2 percent and 1.74 percent in October.

Several others—including Wealth Co MF, Capitalmind MF, Trust MF, 360 One, Quantum MF and Bajaj Finserv MF—also reported meaningful declines in cash reserves.

By contrast, a handful of fund houses took the opposite route, adding to their liquidity. HDFC MF increased its cash buffer to 6.55 percent from 6.34 percent, Quant MF raised its holding to 13.9 percent from 11.77 percent, and Axis MF and Kotak MF nudged theirs up to 4.22 percent and 2.44 percent, respectively.

Samco, LIC Mutual Fund, Helios, Unifi, Groww, Bank of India MF and WhiteOak Capital also reported notable increases in cash levels compared with the previous month.