Fund managers are refraining from investing in the stock market although the sensex has risen by nearly 2000 points from its February lows.
Conservative industry estimates place the cash component of mutual fund houses at Rs 25,000 crore (Rs 250 billion). Fund houses had up to 15 per cent in cash, as per the April 30 figures. The cash component exceeded 15 per cent in as many as 30 diversified equity growth funds.
Sundaram BNP Paribas Mutual Fund topped the list. The company's 4 growth funds had an average cash component of around 20 per cent, with the CAPEX Opportunities Fund (G) having cash to the extent of 29.99 per cent. The three other funds, Growth, Select Midcap (G) and SMILE (G) had 17.7 per cent, 12.65 per cent and 22.04 per cent in cash respectively.
Birla Sun Life AMC had an average cash component of nearly 15 per cent and for the Birla Advantage (G) Fund, it was 17.67 per cent.
SBI Fund Management and ICICI Prudential AMC too have very high cash component (more than 14 per cent), particularly in case of the diversified equity growth funds.
"This is a range-bound market and fund houses are looking at entry and exit prospects. The idea is to buy at lower levels and consider profit-booking when prices firm up. This has to be done without taking too many avoidable risks. Fund managers always look for the right opportunities. They maintain cash positions to be able to invest intelligently in a range-bound scenario. Sometimes they need to hold cash in the best interests of investors," said Naresh Pachisia, MD, SKP Securities.
A senior Birla Sun Life AMC executive attributed the higher cash component to the recent profit booking. "This is a common practice in a volatile market," he added.
RK Gupta, managing director of Taurus Asset Management, considers it prudent to wait and watch, specially in the current market situation. "Technicals are not indicating a bull phase. The market might correct further," he told Business Standard.
