Cash Cushion Grows: Mutual Funds Park Nearly ₹2 Lakh Crore Amid Market Volatility

Image Source: Economic Times

In September 2025, Indian mutual funds increased their cash allocation by ₹1,139 crore, taking the total to ₹1.99 lakh crore. This strategic move reflects caution amid market volatility and correction phases. Fund houses like SBI, PPFAS, and HDFC led the trend, signaling a wait-and-watch approach for fresh equity deployment.

Mutual Funds Build War Chest: Cash Allocation Nears ₹2 Lakh Crore in September

Indian mutual fund houses have ramped up their cash holdings in September 2025, signaling a cautious stance amid ongoing market uncertainty. According to data from the Central Electricity Authority and industry trackers, mutual funds collectively increased their cash allocation by ₹1,139 crore month-on-month, reaching a total of ₹1.99 lakh crore.

Key Highlights from the Allocation Shift:

Month-on-Month Increase

Cash allocation rose from ₹1.98 lakh crore in August to ₹1.99 lakh crore in September.

This represents a modest but strategic increase of ₹1,139 crore.

Percentage of Total AUM

Cash holdings accounted for 4.92% of total assets under management (AUM) in September, slightly down from 4.99% in August, indicating overall AUM growth.

Equity AUM Snapshot

Total equity AUM stood at ₹40.43 lakh crore, reflecting continued investor interest despite cautious fund positioning.

Top Fund Houses by Cash Allocation

SBI Mutual Fund led with ₹31,272 crore in cash, comprising 4.28% of its total AUM.

PPFAS Mutual Fund held ₹28,152 crore in cash, a significant 22.46% of its AUM, indicating a highly defensive posture.

HDFC Mutual Fund and ICICI Prudential Mutual Fund followed with ₹26,851 crore and ₹25,571 crore respectively.

Axis Mutual Fund maintained ₹10,619 crore in cash, about 5.34% of its AUM.

Market Sentiment and Strategy

Fund managers are adopting a wait-and-watch approach, holding cash to deploy during market dips or corrections.

This strategy allows flexibility and risk mitigation amid global economic headwinds and domestic volatility.

Investor Implications

Higher cash levels may signal short-term caution, but also readiness to capitalize on future opportunities.

Investors should monitor fund positioning and market cues before making fresh allocations.

This uptick in cash reserves reflects a prudent recalibration by mutual funds, balancing liquidity with long-term growth potential.

Sources: Economic Times, Moneycontrol

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