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Cash Slashers

Fund houses have driven their investments in equity to over 91 per cent levels

The equity mantra is increasingly being chanted by the mutual fund industry, no doubt charged up by the recent rise in the markets, leading to fully invested portfolios for most fund houses.

For the first time in more than a year, the mutual funds’ equity component of their assets under management (AUM) have exceeded the 90 per cent mark after continuously increasing since March this year. This comes after they had hit a low of 78.3 per cent in February, just before the market rally started on March 9.

Data shows that in August, the cash levels of open-ended equity funds declined to 8 per cent, which was a 18-month low. Between October 2008 and February 2009, the fund houses had increased their cash levels to ward off the storm in the markets. Once the markets started picking up in March 2009, fund houses started putting money in the market, especially after the post-Parliamentary elections rally in the stock markets.

With the markets rising, even the proportion of equity assets have increased from about Rs 1.05 lakh in March to Rs 1.80 crore in August, an increase of 70 per cent.

As fund houses’ confidence-levels rise, the equity component of the NAVs of asset management companies (AMCs) also show increases, especially as is the case with big companies like Reliance, HDFC and others.

Securities and Exchange Board of India (SEBI) data shows that net equity bought by mutual funds between the months of March and August was Rs 7,118 crore. But for the entire year taken together (January to August), the amount stands at Rs 4,990 crore.