Schemes such as IDFC’s Small and Midcap fund hold 11.81% in cash, Franklin Templeton’s India Bluechip fund holds 10.85% and Sundaram Select Small Cap 11.70%.
Fund managers have raised the cash component of their schemes as they strap themselves for an expected rough ride.
Schemes such as IDFC’s Small and Midcap fund hold 11.81% in cash, Franklin Templeton’s India Bluechip fund holds 10.85% and Sundaram Select Small Cap 11.70%.
Others whose data weren’t readily available have also raised their levels well above average.
“We are sitting on 8-9% cash levels and are defensive in our portfolio. We anticipate some pressure on the markets on account of falling demand on infrastructure and consumer discretionary segment, a slowdown in GDP growth and the increased possibility of earnings downgrades,” said Anand Shah, chief investment officer, at BNP Paribas Asset Management India.
As many as 48 equity schemes that have disclosed data for May have a cash level of 6.25%, according to an analysis by DNA. This is higher than the sub-5% usually maintained for meeting redemptions.
The mutual funds for whom data is available include HDFC, DSP BlackRock, Sundaram, Franklin Templeton, Morgan Stanley,IDFC, Tata, Axis, JP Morgan, Principal and Kotak Mahindra Mutual Fund.
The rising cash levels are a function of a volatile market and anticipation of further pain to come, say fund managers.
“We raised cash levels in anticipation of market volatility. Margins are under pressure. We anticipate earnings downgrades and continued weakness in this fiscal .We expect to continue with elevated cash levels for the time being,” said Satish Ramanathan, head of equities at Sundaram Mutual Fund.
“Cash levels went up in May as we churned the portfolio in IDFC Small and Midcap Equity fund. Our current cash holdings is around 7% in this scheme. In case of our other fund IDFC Premier Equity, cash levels may also have shown a rise due to new inflows after we briefly opened it for bulk subscription” said Kenneth Andrade, head - investments, IDFC Mutual Fund said.
Global issues and domestic headwinds have contributed to fund managers piling up the cash.
“Currently there are lot of global headwinds be it related to euro crisis or slowdown in US apart from domestic concerns. We are maintaining 6-7% cash holdings in our portfolio which is slightly higher than normal. The idea is not to be too aggressive and adopt bottom up stock picking approach currently as lot of sectors and stocks are still expensive,” said Mahesh Patil, head equity (domestic assets) at Birla Sun Life Mutual Fund.
Mutual funds were net buyers in Indian markets by Rs434.80 crore in May, and Rs1,998.10 crore since January.
Fears that the Greek government would default on debt repayments lead to negative sentiment in recent times adding to issues of higher inflation and lower growth domestically.
The Nifty on Friday closed at 5366.40, down 2.12% or 116.40 points for the week.
“We expect markets to remain rangebound in the near term as 5200 on Nifty is likely to provide support while the upside seems to be capped in absence of positive triggers,” said Patil.
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