Active equity mutual funds slightly reduced their cash holdings in September, though overall reserves remained elevated, signalling continued caution among fund managers in a volatile market environment.
Data from ACE Equities shows cash reserves in the equity segment dipped marginally to Rs 1.47 lakh crore in September from Rs 1.49 lakh crore in August. Cash as a share of total equity assets slipped below 3 percent the lowest in sixteen months compared with 3.11 percent a month earlier. Total equity AUM stood at Rs 49.06 lakh crore.
SBI Mutual Fund maintained the largest equity cash balance at Rs 23,268 crore, marginally lower than Rs 23,600 crore in August. HDFC Mutual Fund and ICICI Prudential followed with Rs 22,763 crore and Rs 19,655 crore, respectively, down from Rs 22,614 crore and Rs 20,508 crore in the previous month. Other fund houses with elevated cash buffers included PPFAS, Axis Mutual Fund, Nippon India, Kotak Mahindra, and DSP.
Analysts noted that despite the modest decline, cash positions remain higher than usual as market valuations across segments continue to hover above historical averages. Fund managers are refraining from sharp cash calls, with deployment strategies increasingly guided by earnings growth and valuation comfort. While maintaining cash provides flexibility during turbulent phases, it also carries an opportunity cost if equity momentum resumes.
The cautious approach comes against a backdrop of heightened volatility in September. The Sensex and Nifty ended the month with modest gains of 0.6 percent and 0.8 percent, respectively. The BSE MidCap index rose 0.6 percent, while the SmallCap index advanced 1.5 percent.
Cash levels in equity funds have been gradually easing from Rs 1.73 lakh crore in April to Rs 1.65 lakh crore in May and Rs 1.50 lakh crore in June as fund houses deployed money into block deals and initial public offerings.