Mutual Funds' Cash Pile Snaps Growth Streak On Record Investments In October

Cash held by actively managed mutual fund schemes fell in October for the first time in the fiscal, even as allocation towards cash continued to rise as a result of the decline in equity markets.

October saw the benchmark Nifty 50 fall 6.2%—the largest monthly decline since March 2020, which wiped out nearly Rs 30 lakh crore investor wealth.

At the end of October, cash held by various MF schemes was at Rs 1,49,227 crore, marginally below the previous month's figure, according to data provided by ACE Mutual Fund and compiled by NDTV Profit.

Looking at cash holdings as a share of the total assets' value, the allocation grew to its highest so far this year, at just shy of 5%, after falling in September for the first time since April.

This is supported by the decline in value of assets held by such schemes over the last month, when adjusted for fresh inflows during the month.

On an absolute basis, the marginal decline in the cash pile despite record high fresh investments was observed during a month where fund managers also made substantial investments in equities amid falling markets.

While foreign investors made record outflows during the month, domestic institutions, primarily led by mutual funds, made record inflows into equities.

As proceeds from the new fund offerings are often not fully invested during the launch month, when such schemes were excluded, the cash pile continued to grow for the seventh month in a row.

Proceeds from new fund offerings among actively managed equity schemes have been on a declining streak post their peak in June.

Even as inflows into active equity schemes hit a fresh record high in October, the contribution of NFOs fell to its lowest since April.