Having sat on piles of cash during the previous market low, Indian equity mutual funds have turned wiser. During November 2008, just after the market crash sparked by the global crisis, equity funds put together had 17 per cent of their assets in cash. Holdings of idle cash remained high until May 2009. Funds were caught completely by surprise when the Sensex went up by more than 17 per cent in a single day after the election results in 2009. Since then they have been reducing their cash holdings. This time around, when the Modi rally took off, only 3 per cent of the equity funds' assets was parked in cash. Even now, with markets hitting new highs funds across the broad equity category including tax planning funds are fully invested. Only 4 per cent of their total assets under management (₹2.07 lakh crore) is invested in fixed income and cash.

But there are notable outliers. Most of these exceptions are funds which have leeway, as per their mandates, to increase their cash allocations in market situations where they do not find appropriate opportunities to invest. Of the 265 diversified equity funds considered, there are just 12 funds that today have more than 15 per cent of their assets (See: Sitting on cash) in cash and cash equivalent. For instance. Quantum Long Term Equity, a fund which always takes high valuations as a cue to raise cash, has seen cash touch all time high allocation in the last three months - it has stayed above 30 per cent. Never before had its cash allocation exceeded 23 per cent.

In case of ICICI Prudential Dynamic, a fund which again believes in tactical allocation, this is no significant event. The fund manager has an active cash and derivatives strategy and takes aggressive cash positions every now and then based on his view on the markets. The HSBC Dynamic Fund too has hit an all time high cash allocation. The fund was just 2.2 per cent into cash in April 2013, but suddenly raised it to 20 per cent in August 2013 and since then, the fund manager has been steadily increasing the fund's cash allocation. Reliance Small Cap Fund too has held rather higher levels of cash, probably because of the need for caution in the small-cap space after the recent rally in these smaller stocks.

THE PARADOX OF IDLE CASH

• After 2008 market crash, equity funds put together had 17 per cent of their assets in idle cash
• Funds were taken unaware when the markets rallied 17 per cent on a single day in May 2009 after elections
• Smart enough, since the Modi rally took off; fund managers have parked only 3 per cent of their equity funds' assets in cash
• Fund managers have been prudent on maintaining cash

Having sat on piles of cash during the previous market low, Indian equity mutual funds have turned wiser. During November 2008, just after the market crash sparked by the global crisis, equity funds put together had 17 per cent of their assets in cash. Holdings of idle cash remained high until May 2009. Funds were caught completely by surprise when the Sensex went up by more than 17 per cent in a single day after the election results in 2009. Since then they have been reducing their cash holdings. This time around, when the Modi rally took off, only 3 per cent of the equity funds' assets was parked in cash. Even now, with markets hitting new highs funds across the broad equity category including tax planning funds are fully invested. Only 4 per cent of their total assets under management (₹2.07 lakh crore) is invested in fixed income and cash.

But there are notable outliers. Most of these exceptions are funds which have leeway, as per their mandates, to increase their cash allocations in market situations where they do not find appropriate opportunities to invest. Of the 265 diversified equity funds considered, there are just 12 funds that today have more than 15 per cent of their assets (See: Sitting on cash) in cash and cash equivalent. For instance. Quantum Long Term Equity, a fund which always takes high valuations as a cue to raise cash, has seen cash touch all time high allocation in the last three months - it has stayed above 30 per cent. Never before had its cash allocation exceeded 23 per cent.

In case of ICICI Prudential Dynamic, a fund which again believes in tactical allocation, this is no significant event. The fund manager has an active cash and derivatives strategy and takes aggressive cash positions every now and then based on his view on the markets. The HSBC Dynamic Fund too has hit an all time high cash allocation. The fund was just 2.2 per cent into cash in April 2013, but suddenly raised it to 20 per cent in August 2013 and since then, the fund manager has been steadily increasing the fund's cash allocation. Reliance Small Cap Fund too has held rather higher levels of cash, probably because of the need for caution in the small-cap space after the recent rally in these smaller stocks.

THE PARADOX OF IDLE CASH

• After 2008 market crash, equity funds put together had 17 per cent of their assets in idle cash
• Funds were taken unaware when the markets rallied 17 per cent on a single day in May 2009 after elections
• Smart enough, since the Modi rally took off; fund managers have parked only 3 per cent of their equity funds' assets in cash
• Fund managers have been prudent on maintaining cash