For the first time ever, mutual funds in India are collectively holding more than 4 lakh crore in cash. According to the latest data from PrimeMF, the cash holdings rose nearly 18 percent in July to reach 4.16 lakh crore after two straight months of decline. This sharp rise reflects a mix of factors including stretched stock valuations, growing trade concerns, and the launch of multiple new fund offers.
Among the fund houses, SBI Mutual Fund, Axis Mutual Fund, and Aditya Birla Sun Life Mutual Fund were at the forefront of this rise. Their cash positions grew by over ten thousand crore, seven thousand crore, and four thousand crore respectively. On the other hand, some fund houses such as Franklin Templeton, Canara Robeco, PGIM India, and DSP saw moderate reductions in their cash levels.
Equity schemes also contributed to the rise in overall cash, with their holdings climbing to 1.52 lakh crore. Interestingly, some smaller and boutique fund houses like TRUST Mutual Fund, Quantum Mutual Fund, PPFAS, and Old Bridge kept more than ten percent of their equity assets in cash, showing a cautious stance towards current market conditions. Larger names like Samco Mutual Fund and Motilal Oswal Mutual Fund also held close to eight percent in cash.
Market experts explain that while fund managers generally prefer to remain fully invested, cash levels tend to go up when valuations appear stretched or when heavy inflows enter the market. Kaustubh Belapurkar, Director of Manager Research at Morningstar Investment Research India, noted that most managers usually hold less than five percent in cash. However, in periods of heightened market exuberance, that number can rise temporarily until managers find attractive entry points.
The surge in July was also influenced by a busy month for new fund launches. As many as thirty new fund offers were introduced, with Jio BlackRock raising over three thousand five hundred crore in cash through three debt funds. TRUST Mutual Fund also entered the market with a multicap fund.
At the same time, some well-known companies saw a reduction in mutual fund holdings during this period, including Bharti Airtel, Solar Industries, IndiGo, and MCX. Experts believe this reflects a cautious repositioning by fund managers, as they wait for clarity on earnings growth and the impact of trade tensions.
Sandeep Bagla, Chief Executive Officer of TRUST Mutual Fund, pointed out that managers are in no rush to deploy this cash. With global trade uncertainties and domestic stock valuations still high, many believe it is wiser to stay liquid and wait for more favorable opportunities. He also mentioned that their multicap strategy involves balancing allocations across large, mid, and small cap companies to capture sectoral growth when the market conditions improve.
The record rise in cash holdings signals that even though mutual funds have witnessed strong inflows, fund managers are treading carefully. They are balancing investor money between safety and opportunity, waiting for the right time to re-enter the market more aggressively.
As markets continue to remain volatile, the high cash levels highlight the cautious optimism that is shaping investment decisions in the second half of 2025.
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