Widely read:
Once overweight on equities and neutral on cash, mutual funds seem to have reversed that position. Welcome to the new world of cash stash!
As the market continues to yo-yo, fund mangers have decided to play it safe; as it is quite evident from the cash position (percentage of net assets) of the various funds*. A look at the equity portfolios of March 2008 reveals that funds are on a strict liquid diet. This will not only insulate the fund from abrupt fluctuations, as much as possible, but also give the fund managers ample leeway to cherry pick as and when the market throws up great opportunities.
As on March 31, Sundaram BNP Paribas Capex had 30 per cent of its assets in cash, followed by LICMF Growth with 29.47 per cent. The cash position of these two schemes during the peak of bull run (January 2008) was 9 per cent for LICMF Growth and 7 per cent for that of Sundaram BNP Paribas Capex. But in terms of absolute amount of cash holding, the Reliance brigade rules the roost.
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As on March 2008, diversified equity funds were sitting on a cash pile of Rs 7,859 crore, as against Rs 4,773 crore in January 2008. A total of 108 funds increased their cash allocation expressed as percentage of net assets, while 33 saw a decline. All in all, cash available with the fund houses in March increased to Rs 7,859 crore (8.64 per cent of the total assets) from Rs 4,773 crore in January (4.46 per cent of total assets).
While sitting on cash protects you - the investor, from a sharp downfall, it also implies that you miss out on sudden upward spurt; a phenomenon which has now become a part and parcel of Indian equity markets.
* We are only referring to the cash positions of diversified equity funds.
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