The stock market is not showing any signs of fatigue yet, but mutual fund managers are not taking any chances. To seize the opportunity in case the market corrects sharply, and also as a safeguard against sudden redemptions, fund houses are maintaining cash levels as high as 20-25% (of their net corpus) in select schemes.
Monthly factsheets of mutual funds reveal that fund houses having focussed infrastructure funds are keeping more cash in their kitty than the rest. ICICI Prudential Infrastructure, AIG Infrastructure, SBI Infrastructure Fund, Birla Sunlife Infrastructure Fund and Reliance Infrastructure are sitting on a cash pile between 6-20% of their net corpus, according to mutual fund tracker Value Research. Brokers say one reason for this trend could be that most stocks in this segment appear over priced at current levels.
Baroda Pioneer Infrastructure Fund, which closed subscription recently, has about Rs 16 crore in cash waiting for deployment. At the fund-house level, Baroda Pioneer MF holds over 17% in cash as of July-end. If one takes a wider view, investors have not lost much as market has only risen around 1.5% over the past one month.
"Gains from investing at lower levels could be much more than the potential upsides from these levels. The market is currently in a trading range and we do not expect it to move in one direction. We'll wait for good opportunities by sitting on cash," said Rajan Krishnan, CEO, Baroda Pioneer Mutual Fund.
Mr Krishnan is of the belief that there are several good stocks that can be bought at current levels. Some infrastructure companies have become 'good buys' post the fall in prices due to extended gestation period and delays as a result of the monsoon, he added.
If one excludes the infrastructure pack, there are several equity funds as well that are holding high cash levels. Religare Equity (with 29% cash holding), UTI Banking Sector Fund (25%), Axis Equity Fund (21%), ICICI Prudential Advisor Fund (19%), Magnum FMCG Fund (18%) and JM Multistrategy Fund (14%) are amongst funds with significantly higher cash levels. Axis Mutual Fund (with 21% cash holding) and ICICI Prudential Mutual Fund (13%) lead the fund houses' tally of holding large amounts of cash at July-end.
"In our case, we do not take cash calls; cash in our schemes could be related to our futures positions," said Nilesh Shah, deputy managing director, ICICI Prudential Mutual Fund. "Market, for sure, is trading at a higher level. We are not very clear of the direction. But then, it surely has not become a bubble to short," Mr Shah added.
According to institutional investors, domestic portfolio investors like mutual funds and insurance companies are not happy about the stretched valuations of Indian shares. At 17-18 times estimated one-year forward earnings, share prices appear expensive relative to historical valuations.
Several fund managers hold the view that market could slip into a correction mode at the slightest negative newsflow from western markets. If one goes by the recent BoA Merrill Lynch survey, fund managers eyeing Asia-Pacific are underweight on India, thanks to 'pricey' valuations.
Reflecting this sentiment, domestic institutional investors have sold shares worth Rs 13,000 crore since June this year. Of this, mutual funds have sold shares in excess of Rs 6,400 crore during the period.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/MFs-stay-cash-ready-for-possible-bottom-fishing/articleshow/6423537.cms
Monthly factsheets of mutual funds reveal that fund houses having focussed infrastructure funds are keeping more cash in their kitty than the rest. ICICI Prudential Infrastructure, AIG Infrastructure, SBI Infrastructure Fund, Birla Sunlife Infrastructure Fund and Reliance Infrastructure are sitting on a cash pile between 6-20% of their net corpus, according to mutual fund tracker Value Research. Brokers say one reason for this trend could be that most stocks in this segment appear over priced at current levels.
Baroda Pioneer Infrastructure Fund, which closed subscription recently, has about Rs 16 crore in cash waiting for deployment. At the fund-house level, Baroda Pioneer MF holds over 17% in cash as of July-end. If one takes a wider view, investors have not lost much as market has only risen around 1.5% over the past one month.
"Gains from investing at lower levels could be much more than the potential upsides from these levels. The market is currently in a trading range and we do not expect it to move in one direction. We'll wait for good opportunities by sitting on cash," said Rajan Krishnan, CEO, Baroda Pioneer Mutual Fund.
Mr Krishnan is of the belief that there are several good stocks that can be bought at current levels. Some infrastructure companies have become 'good buys' post the fall in prices due to extended gestation period and delays as a result of the monsoon, he added.
If one excludes the infrastructure pack, there are several equity funds as well that are holding high cash levels. Religare Equity (with 29% cash holding), UTI Banking Sector Fund (25%), Axis Equity Fund (21%), ICICI Prudential Advisor Fund (19%), Magnum FMCG Fund (18%) and JM Multistrategy Fund (14%) are amongst funds with significantly higher cash levels. Axis Mutual Fund (with 21% cash holding) and ICICI Prudential Mutual Fund (13%) lead the fund houses' tally of holding large amounts of cash at July-end.
"In our case, we do not take cash calls; cash in our schemes could be related to our futures positions," said Nilesh Shah, deputy managing director, ICICI Prudential Mutual Fund. "Market, for sure, is trading at a higher level. We are not very clear of the direction. But then, it surely has not become a bubble to short," Mr Shah added.
According to institutional investors, domestic portfolio investors like mutual funds and insurance companies are not happy about the stretched valuations of Indian shares. At 17-18 times estimated one-year forward earnings, share prices appear expensive relative to historical valuations.
Several fund managers hold the view that market could slip into a correction mode at the slightest negative newsflow from western markets. If one goes by the recent BoA Merrill Lynch survey, fund managers eyeing Asia-Pacific are underweight on India, thanks to 'pricey' valuations.
Reflecting this sentiment, domestic institutional investors have sold shares worth Rs 13,000 crore since June this year. Of this, mutual funds have sold shares in excess of Rs 6,400 crore during the period.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/MFs-stay-cash-ready-for-possible-bottom-fishing/articleshow/6423537.cms
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'I made my money by selling too soon.'
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