Cash holdings of equity mutual fund (MF) schemes eased in September 2025 as fresh inflows moderated and fund managers deployed more money into equities. According to a report by Nuvama Alternative & Quantitative Research, equity MF schemes collectively held Rs 1.76 trillion in cash at the end of September — around Rs 400 crore lower than the previous month.
The cash-to-assets ratio of equity funds slipped from 5.23 per cent in August to 5.13 per cent in September. Net inflows into equity MF schemes declined for the second consecutive month, down 9 per cent to Rs 30,422 crore.
Typically, cash levels in equity schemes are influenced by fund inflows and managers’ market outlook. However, most funds avoid maintaining cash levels above 5 per cent.
Among fund houses, Kotak Mutual Fund led the deployment trend, cutting its cash holdings by Rs 1,300 crore to Rs 5,800 crore, representing 2.6 per cent of assets. Nippon India MF and Quant MF also reduced cash levels by Rs 800 crore and Rs 700 crore, respectively. “This trend reflects a continued tilt toward equity allocation among select funds,” the Nuvama report noted.
On the other hand, Motilal Oswal MF raised its cash balance by Rs 3,600 crore, increasing its cash ratio from 2.2 per cent to 6.2 per cent. PPFAS MF maintained the highest cash ratio in the industry at 21.8 per cent, adding Rs 1,100 crore in September.
According to fund managers, domestic equities now present better value compared to a year ago as valuations have corrected over time. “The time correction in equities along with a decline in bond yields over the past year has brought valuations on our preferred gauge of earnings yield to bond yield spread near historical medians,” SBI MF said in its monthly outlook, adding that equity market sentiment has cooled to neutral levels after euphoric highs last year.
Kotak Mahindra Bank and ICICI Bank topped mutual funds’ buy list in September, with equity schemes investing about Rs 7,600 crore in the two stocks. Eternal, InterGlobe Aviation, and Titan Company were also among the top five buys. On the sell side, Axis Bank, Maruti Suzuki, and Bajaj Finance were among the most offloaded stocks during the month. |
