Mutual funds' cash holding fell in Sep amid decline in inflows

Cash holdings of equity mutual fund (MF) schemes moderated in September amid a slowdown in fresh inflows.

Equity MF schemes held cash worth Rs 1.76 trillion at the end of September 2025 — about Rs 400 crore lower than the previous month, according to a report by Nuvama Alternative & Quantitative Research.

Cash in equity schemes as a percentage of total assets declined from 5.23 per cent in August to 5.13 per cent in September.

Net inflows into equity MF schemes were down for the second consecutive month in September, slipping 9 per cent to Rs 30,422 crore.

The cash held by equity schemes typically depends on the level of net inflows and fund managers’ outlook about the market.

However, most schemes avoid holding over 5 per cent cash.

“Kotak MF led the deployment, reducing its cash holdings by Rs 1,300 crore to Rs 5,800 crore (2.6 per cent), followed by Nippon India MF and Quant MF, which pared cash by Rs 800 crore and Rs 700 crore, respectively.

This trend reflects a continued tilt toward equity allocation among select funds,” the report said.

Cash holding went up in the case of some fund houses.

Motilal Oswal MF increased cash by Rs 3,600 crore, taking its holding from 2.2 per cent to 6.2 per cent.

PPFAS MF’s cash holding remained elevated at 21.8 per cent with Rs 1,100 crore addition during the month.

According to fund managers, domestic equities are now offering better value compared to a year back as valuations have eased post the time correction.

“The time correction in equities along with a decline in bond yields over the past year has brought valuations on our preferred gauge of earnings yield to bond yield spread near historical medians.

“Similarly, equity market sentiment as measured through our proprietary measure has cooled to neutral levels versus the very euphoric readings same time a year ago,” SBI MF said in its monthly outlook.

Kotak Mahindra Bank and ICICI Bank were at the top of the MF buy chart last month, as equity schemes together deployed Rs 7,600 crore into the two stocks.

Eternal, Interglobe Aviation and Titan were the other stocks in the top five.

Axis Bank, Maruti Suzuki and Bajaj Finance were among the most sold stocks.