cash market: Cash is king now! Mutual funds hoarding Rs 63,000 crore, Buffett $130 billion


NEW DELHI: Sparking a debate over whether it is the right time to stay fully invested or keep some powder dry amid a troublesome global macro environment, some of the top investors across the world have been sitting on mountains of cash.

Last month, Warren Buffett-led Berkshire Hathaway had disclosed that its cash pile jumped 18% on-quarter at the end of 2022 to nearly $130 billion.

Back home, the latest data shows that equity mutual funds are hoarding Rs 63,300 crore cash in their portfolios. Cash comprised 5% of their total assets under management (AUM), up 28 bps on a month-on-month basis.

India’s largest fund house SBI Mutual Fund, which handles equity investments worth Rs 4.5 lakh crore, was seen holding 10.2% cash in February, Motilal Oswal data shows.

The largest cash holding was that of PPFAS Mutual Fund, famed for its value investing strategy, which chose to keep 14% of its AUM in cash. For Axis Mutual Fund, cash comprised 12.6% of AUM, 7.9% for ICICI Prudential AMC, 5.4% for HDFC MF and 3.7% for Kotak MF.

The average cash holding of top 20 funds in February was at a two-year high of 6.2%.

Motilal has told its clients to be very selective at this stage. “We are not very aggressive in terms of buying. We definitely have to wait and watch. In terms of short term trading positional views, we are having a sell-on-bounce kind of a strategy,” said Motilal’s head of research Siddhartha Khemka.Rohan Mehta of Turtle Wealth Management is sitting on 25-35% cash at current levels, waiting for the right opportunity

In the last two weeks, the risk appetite of investors has plunged further following a crisis in regional banks in the United States and Credit Suisse in Europe.

In anticipation of a Lehman Brothers like crisis, many individual investors have also been raising cash levels in their portfolios to be able to take advantage of the dip later on.

“The market will throw opportunities if the crisis deepens further. So it is better to keep your war chest ready,” said an Ahmedabad-based trader-cum-investor.

After hitting a record high on December 1 last year, Sensex and Nifty have been on a losing streak. The sell-off which started with concerns over valuations and FII outflows amid rate hikes and China re-opening, got extended due to a crisis in Adani stocks and banking turmoil in the US.

“Elevated valuations, tightening liquidity and its potential fallout on growth have been headwinds for equities for the past many months even as longer-term tailwinds of reviving corporate profitability and potential revival in manufacturing and investment cycle have provided a floor to the market,” SBI MF said.

Fund managers expect the tug of war to continue till there is a decisive pullback on bond yields that in turn opens space on equity valuations.

Bajaj Allianz Life Insurance, which is a long-term investor in Indian equities, said it is fully invested in largecap equity funds and has minimal cash exposure. “In our key active mid-cap equity fund we have a relatively higher cash exposure presently and will look to deploy the same as the opportunity arises,” said company CIO Sampath Reddy.

Rajesh Khothari, CIO, AlfAccurate Advisors, however, says the valuations are in our favour now. “It is a good time for investors to top up, to make an entry and that is the reason why we are fairly positive on the market with a three-five-years’ view,” he said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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