Mutual Funds Build Cash Reserves to ₹1.90 Lakh Crore in July as Fund Managers Turn More Selective

Mutual funds in India significantly increased their cash reserves in July, adding more than ₹7,800 crore during the month as fund managers maintained greater liquidity in their portfolios. According to data from ACE MF, total cash holdings across mutual funds rose to approximately ₹1.90 lakh crore in July, up from ₹1.83 lakh crore in June.

The July increase marks a recovery from the 19-month low recorded in June. Cash holdings represented around 4.6% of the mutual fund industry's total assets during the month, while equity assets under management stood at ₹47.03 lakh crore.

The rise in cash reserves comes at a time when fund managers are continuing to adjust portfolios selectively. Holding cash gives asset managers greater flexibility to respond when attractive investment opportunities emerge, while also providing liquidity during periods of market uncertainty.

PPFAS Mutual Fund Holds the Largest Cash Reserve

Among fund houses, PPFAS Mutual Fund had the largest cash reserve in July, with around ₹25,291 crore. This represented 16.32% of its total assets under management. The fund house manages three equity-oriented schemes.

The largest portion of PPFAS's cash position was held by the Parag Parikh Flexi Cap Fund, which had approximately ₹24,793 crore in cash. The Parag Parikh ELSS Tax Saver Fund and Parag Parikh Large Cap Fund had considerably smaller cash holdings of about ₹490 crore and ₹7 crore, respectively.

Rajeev Thakkar, CIO and director of PPFAS Mutual Fund, indicated that the cash position in the flexi-cap fund has already declined substantially from its earlier peak. Cash allocation, which had reached roughly 25%, has fallen to around 14-15%, reflecting a gradual increase in deployment as investment opportunities have emerged.

Thakkar also explained that maintaining elevated cash levels over the previous two years had not materially damaged investor returns. In his view, the strategy provided some support during a period when the market moved largely sideways.

SBI, HDFC and ICICI Prudential Also Hold Large Cash Piles

Several of India's biggest fund houses continued to maintain substantial liquidity in July.

SBI Mutual Fund held about ₹24,415 crore in cash, while HDFC Mutual Fund had approximately ₹23,173 crore. ICICI Prudential Mutual Fund followed with around ₹21,159 crore. Quant Mutual Fund's cash holdings stood at ₹14,739 crore, while Axis Mutual Fund had approximately ₹12,089 crore.

According to the data, six fund houses had cash holdings exceeding ₹10,000 crore during July. The figures highlight how significant cash management has become within large mutual fund portfolios.

Other fund houses also retained varying levels of liquidity. Kotak Mutual Fund held about ₹5,242 crore, while Franklin Templeton Mutual Fund had ₹5,097 crore. WhiteOak Capital Mutual Fund and Canara Robeco Mutual Fund held around ₹3,335 crore and ₹3,211 crore, respectively.

Abakkus Mutual Fund had approximately ₹689 crore in cash, while Samco Mutual Fund and Quantum Mutual Fund held around ₹149 crore and ₹139 crore. JioBlackRock Mutual Fund had about ₹40.28 crore, equivalent to 0.87% of its total assets.

PPFAS and Quant Lead on Cash as a Share of AUM

Looking at cash holdings relative to total assets rather than absolute amounts gives another perspective on fund managers' liquidity preferences.

PPFAS Mutual Fund had the highest cash allocation at 16.32% of AUM in July. Quant Mutual Fund was close behind at 16.16%, while WhiteOak Capital Mutual Fund had 11.56% of its AUM held in cash.

This distinction is important because a large cash balance in rupee terms does not necessarily indicate the highest level of caution. Larger fund houses naturally manage bigger portfolios, meaning their absolute cash reserves can be substantial even when cash represents a smaller portion of total assets.

SIFs Also Maintain Cash Reserves

Cash holdings were not limited to conventional mutual fund schemes. Specialised Investment Funds, or SIFs, also reported meaningful cash positions in July.

ICICI Prudential Mutual Fund's iSIF had the largest cash holding among SIFs at ₹574 crore. Quant Mutual Fund's QSIF followed with ₹308 crore, while the Dyna SIF managed by 360 ONE Mutual Fund held around ₹124 crore.

Overall, the July data points to a cautious but flexible approach among several fund managers. The recovery in aggregate cash reserves from June's low suggests that fund houses are keeping a larger liquidity buffer while selectively assessing opportunities in the equity market.

For investors, higher cash allocation does not automatically signal that fund managers expect a market decline. Instead, it can reflect portfolio strategy, valuation considerations and the desire to have funds available when attractive opportunities arise. The direction of these cash levels in the coming months could therefore offer an additional indicator of how fund managers are positioning their portfolios.