MF houses cut cash reserves, bet on realty

COIMBATORE: Fund houses are finally deploying their hard preserved cash in the market. After hitting a high of 22% in February, cash levels of mutual funds (MFs) have come down to 12% in May, the lowest in nearly a year. Fund houses now hold Rs 10,432 crore in cash compared to a high of Rs 11,821 crore hit in February.

Cash holdings have fallen nearly 10% in three months, data compiled by HDFC Securities and NAV India shows. MFs usually have about 5-7% in cash but the market meltdown pushed many fund houses to increase cash holdings drastically.

Cash levels of MFs have remained in the 18-20 % range since October as they held investors��� money back to prevent wealth erosion in the downturn. They remained quite conservative even during the early stages of the current market rally and seem to have shed their inhibitions only after the election results were announced.

���Fund managers chose to invest as the markets showed sustained signs of recovering from the lows,������ say analysts.
���The clear mandate has fuelled hopes about reforms and clearly the perception about growth has changed,������ says Krishna Sanghvi, V-P, equity, Kotak Mahindra MF.

���Fund houses have deployed more money only after the elections,������ he says. Reliance, UTI, HDFC, SBI and Sundaram BNP Paribas are among those that have seen the largest change in equity holdings in May.