Indian Mutual Funds Adopt Cautious Approach, Bolster Cash Holdings in April 2025

In April 2025, India’s top mutual fund companies made a noticeable move: they boosted their cash reserves. They’re also playing it cautiously. With markets acting jittery and stock prices running high, these fund houses are choosing to hold onto more cash. The goal? Stay ready, stay liquid, and reduce the risk of getting caught off guard.

A Closer Look at the Cash Surge

Let’s break down who’s holding how much:

• SBI Mutual Fund, the country’s most significant player, is sitting on ₹63,800 crore in cash, about 8.3% of its equity assets.
• ICICI Prudential Mutual Fund isn’t far behind with ₹35,300 crore, or 6.7%.
• HDFC Mutual Fund holds ₹35,000 crore in cash, 7.5% of its equity portfolio.
• PPFAS Mutual Fund stands out with a hefty 21.1% cash ratio, which is ₹13,251 crore.
• Axis Mutual Fund has ₹14,971 crore in cash, around 7.9%.

Add it all up, and India’s top 20 mutual fund houses are holding ₹2.42 lakh crore in cash, about 5.9% of their total equity investments. That’s a solid safety cushion.

Drivers Behind the Conservative Strategy

1. High Valuations

Stock prices are looking expensive. The Nifty 50 and Sensex have been pushing the upper limits on price-to-earnings ratios, hinting that a market correction could be around the corner.

2. Regulatory Nudge 

SEBI has been asking fund managers, especially in small—and mid-cap spaces, to be more transparent about risks, which is pushing them to be extra careful.

3. Liquidity Needs

Holding more cash makes it easier to handle redemptions and snap up good deals if the market dips. With the upcoming general elections and inflation worries abroad, having that cash buffer makes sense.

4. Profit Booking

Some managers are locking in gains from sectors that may be overvalued and either reallocating funds to safer bets or parking them in cash temporarily.

What the Experts Are Saying

Harsha Upadhyaya, CIO of Equity at Kotak AMC, said, “We believe in being cautious when valuations are stretched. Holding cash is not an avoidance of equity but a strategic choice to enter at better prices when markets correct.”

Rajeev Thakkar of PPFAS Mutual Fund echoed this with his value-first mindset: “Cash is a tool, not a drag. It allows us to act when others are forced to retreat.”

What It Means for You as an Investor

If you’re investing in mutual funds, here’s what you should take away:

• Know Your Fund: Understand why your fund is holding cash. It’s not necessarily bad; it might even be a smart move.
• Think Long-Term: Funds might underperform during rallies while holding more cash. But they’re better positioned when the tide turns.
• Diversify: Don’t put all your eggs in one basket. Spread out your risk to stay balanced.
• Stay Informed: Higher cash doesn’t always mean poor performance. It might mean your fund manager is playing the long game.

Independent wealth advisor Meenakshi Sharma says, “A 10% cash position in an equity fund is not necessarily negative. It may reflect foresight. The key is whether the fund manager can redeploy it intelligently when the time comes.”

What’s Next?

This careful stance by mutual funds may last a bit. Fund managers will likely stay alert with elections ahead and global economic signals still mixed. But they’re not sitting still; they’re ready to move when the market makes sense.

And for you? Keep your eyes on the long haul. Mutual funds, especially the actively managed ones, are built to adjust. Today’s cash-heavy portfolio might be tomorrow’s imaginative play. The key is patience, perspective, and ensuring your investment strategy fits your goals.