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Fund Managers Wait And Watch

Fund managers in their zeal to play safe didn’t deploy cash

While investors still debate as to the sustainability of this rally, fund managers are playing it safe. In April 2009, the Sensex bagged the best monthly gain of 17.46 per cent in almost a decade as Foreign Institutional Investors (FIIs) turned into net buyers of around Rs 7,384 crore. But domestic mutual funds are still holding on to a significant portion of their assets in open-ended equity schemes in cash and debt – Rs 16,000 crore, to be more precise, or around 16 per cent. Though it’s marginally down in percentage terms from March’s 18 per cent, in absolute terms it has fallen by just Rs 169 crore.

Last year, fund managers fled to debt and cash to escape the carnage in the equity market. The new year brought no relief. The Sensex lost around 8 per cent in the first two months of 2009 and the exposure to cash and debt stood at around 21 per cent in the month of February 2009.

Since March 9, 2009 the market has been on its way up and till May 11, 2009, the Sensex has gained a solid 43 per cent. But fund managers have adopted more of a wait-and-see strategy as they see how the election results pan out.

More cash please

Three fund houses that have actually increased the cash exposure by Rs 100 crore.

Reliance Mutual Fund, the largest fund house in terms of Assets Under Management (AUM) and with the highest cash exposure, has increased its cash position by Rs 471 crore over the previous month. The fund house has no debt exposure and is currently holding 26.89 per cent of its assets in cash.

ICICI Prudential Mutual Fund has increased its allocation to cash and debt by Rs 265 crore. From 9.13 per cent (March 2009), it has gone up to 11.43 per cent (April 2009).

Franklin Templeton Mutual Fund has increased exposure to cash and debt by Rs 127 crore to touch Rs 659 crore (April 2009).

Buying equity

But there are fund houses that have jumped right into the rally. Four of them reduced the cash and debt exposure in equity schemes by more than Rs 100 crore in the month of April.

Sundaram BNP Paribas Mutual Fund reduced its cash and debt exposure by Rs 471 crore to bring it down to Rs 337 crore.

Birla Sun Life Mutual Fund reduced the allocation to cash and debt by Rs 188 crore. It has come down from 18.22 per cent to 12.54 per cent.

Tata Mutual Fund now has just 10.87 per cent of its assets in cash and debt, down from 17.28 per cent.

HDFC Mutual Fund reduced the debt and cash exposure in its equity schemes by Rs 109 crore to currently stand at 6.56 per cent.

Not Lured By Equity
Fund House  March 2009    April 2009  
  Cash & Debt (Rs /crore)  Assets (%)  Cash & Debt (Rs /crore)  Asests (%)
Reliance Mutual Fund 5431 28.08 5902 26.89
UTI Mutual Fund 2244 25.97 2153 22.33
SBI Mutual Fund 1657 20.92 1745 19.06
DSP BlackRock Mutual Fund 946 12.16 972 11.64
ICICI Prudential Mutual Fund 615 9.13 881 11.43
Franklin Templeton Mutual Fund 532 6.94 659 7.48
HDFC Mutual Fund 712 9.08 604 6.56
Birla Sun Life Mutual Fund 790 18.22 601 12.54
HSBC Mutual Fund 487 20.97 457 17.69
Sundaram BNP Paribas Mutual Fund 808 21.94 337 7.95
Tata Mutual Fund 471 17.28 331 10.87
Kotak Mahindra Mutual Fund 323 17.23 270 12.84
The percentage of cash and debt holdings only refer to the net assets in open-ended equity schemes.
Data for Fidelity Mutual Fund and Benchmark Mutual Fund has not been included.