Finance Desk – As of March 2025, mutual funds in India are holding the highest level of cash in 15 years. This cautious move by fund managers signals a shift in strategy, as they choose to hold on to cash rather than invest aggressively in a market trading near all-time highs.
Why Are Fund Managers Holding Cash?
According to a report by Elara Securities, cash levels across active mutual fund schemes have sharply risen, a pattern last seen during the market phases of 2011 and 2018. Experts believe this is not due to a lack of money, but rather a lack of attractive investment opportunities at current high stock valuations.
Adhil Shetty, CEO of Bankbazaar.com, explains that fund managers are waiting for better risk-reward setups. “Many are finding fewer fundamentally strong stocks at reasonable prices and are choosing to stay in cash temporarily rather than invest in expensive stocks.”
Historical Pattern: What Happened in 2011 and 2018?
Interestingly, in both 2011 and 2018, the Nifty index witnessed strong rallies after mutual funds held high levels of cash. However, these rallies were mostly led by large-cap stocks, while small and mid-cap stocks contributed little.
This pattern suggests that while the broader market may look strong, the depth of the rally could be limited.
Current Data: Cash Levels Continue to Climb
As of February 2025, the cash levels in large-cap mutual fund schemes stood at 4.8%—the highest since June 2023.
The total cash held by mutual funds increased to ₹17,430 crore in March 2025, compared to ₹16,215 crore in February.
This rising cash trend began around June 2024, when the markets started to correct slightly, prompting many asset management companies (AMCs) to raise their cash holdings gradually.
What Should Investors Do?
Don’t panic: High cash levels are not a negative sign. They often indicate prudence and caution by fund managers.
Wait for better opportunities: Fund managers may be preparing to buy when valuations are more attractive.
Focus on long-term goals: If you are investing through SIPs (Systematic Investment Plans), continue as planned. Timing the market rarely works in the long run.
Diversify: Consider having a mix of large-cap, mid-cap, and debt funds based on your risk appetite.
