Mutual funds: Why are mutual fund schemes sitting with cash?

Mutual funds: Some mutual fund schemes are currently saving cash instead of spending money because they feel that shares have become expensive in the market and further decline is being awaited. They believe that it is more sensible to invest at the right time instead of rushing. On the other hand, some funds are not holding cash and are remaining active in the market. It is important for investors to understand that every fund has a different strategy and it is based on their thinking and experience.

Mutual funds: While many investors are busy looking for stocks giving good returns in the stock market, some mutual fund schemes have saved a large amount of money (cash). Only 5 schemes have Rs 58,442 crore in cash, which is about 30% of the total cash of the mutual fund industry.

Ahead of these is Parag Parikh Flexi Cap Fund, which alone has Rs 22,360 crore in cash. Apart from this, funds like SBI Contra Fund, HDFC Flexi Cap, Motilal Oswal Midcap, and HDFC Midcap Opportunities are also sitting on a lot of cash.

Why are fund managers holding money?

These fund managers believe that the market has become very expensive right now, especially since the prices of midcap and smallcap stocks have increased more than necessary. Therefore, they are waiting for the market to fall, so that good stocks can be bought at a lower price.

That is why they are not spending money at the moment, this is not out of fear or haste, but a well-thought-out strategy.

Some funds are diverting cash towards the primary market.

Not investing money when the market is going up shows that many fund managers do not want to chase the market boom. Instead, they are focusing on primary market options like IPO, where they see new and better opportunities.

Status of Largecap, Midcap and Smallcap Funds

Largecap funds: Their cash has reduced a bit because there is still trust in these companies for investment.

Midcap funds: Their cash has increased, meaning they have become cautious. Midcap funds now have about ₹29,900 crore cash.

Smallcap funds: Here the cash has remained almost stable, there has not been much change.

What do Parag Parikh and funds like Quantum think?

Parag Parikh Fund House believes that good investment opportunities are not available every day, so they save cash and invest at the right time like showing patience in Test cricket.

Quantum AMC also keeps about 12% cash and says that we are sitting on the money because good shares are not available at cheap prices at the moment.

Not all funds are doing this

Edelweiss Mutual Fund believes that it is not their job to sit on cash, rather they have to make a balance as to where and when to invest money.

Experts at ICICI Direct say that keeping too much cash is a risky decision because it is difficult to say when the market will fall, and when it falls, investing at that time can be even more difficult.

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