Stock Market At All-Time Highs: Equity Mutual Funds Report Elevated Cash Levels

The Sensex crossed the 86,000 mark and the Nifty 50 moved above 26,300 for the first time, on November 27, 2025, creating fresh highs after more than a year. In the meanwhile, out of the 48 mutual fund houses in the country, 12 fund houses held over Rs 10,000 crore worth of assets in cash.

Diversified equity mutual funds together hold Rs 1.32 lakh crore of their total portfolios in cash, as on October 31, 2025. Out of these 313 diversified equity mutual fund schemes, 25 funds held over 8 per cent of their portfolios in cash, shows data from Ace Mutual Fund.

By percentage allocation, Invesco Mutual Fund, PPFAS Mutual Fund and Axis Mutual Fund held the most cash at 18.84 per cent, 8.71 per cent and 9.84 per cent of their diversified equity holdings in cash, respectively.

Diversified equity funds here include fund categories, such as large-, mid-, small-, large-&-mid-, flexi-, multi-cap, and equity-linked savings schemes.

By absolute market value, ICICI Prudential Mutual Fund holds the highest amount of cash at Rs 65,058 crore. The largest fund house, SBI Mutual Fund, holds Rs 63,412 crore in cash, which is about 5 per cent of its total diversified equity schemes AUM. HDFC Mutual Fund and Nippon India Mutual Fund hold Rs 48,620 crore and Rs 33,439 crore in cash, respectively.

Among individual schemes, SBI Contra Fund has the highest cash allocation at 14.34 per cent (Rs 7,060 crore), followed by the third largest fund in the small cap space– SBI Small Cap Fund with 13.5 per cent (Rs 4,989 crore). Other funds with over 12 per cent cash include Tata Small Cap Fund (12.98 per cent), Motilal Oswal Midcap Fund (12.77 per cent), Quantum Small Cap Fund (12.59 per cent) and HDFC Focused Fund (12.52 per cent), according to data from Ace Mutual Fund.

Fund managers typically hold higher cash in the portfolio when they believe the valuations in the market to be stretched, or when they feel that there are limited attractive buying opportunities.

Holding high cash levels in the scheme’s portfolio also gives them flexibility to deploy money quickly into the right opportunities as and when there is an opportunity in falling markets. During periods of high volatility, cash also provides a cushion to reduce downside risk. Additionally, some categories like contra or small-cap funds keep cash to manage sudden inflows or outflows without being forced to buy overpriced stocks.

However, high cash holdings may also mean the fund’s returns could lag during strong market rallies, since a portion of the money in the overall portfolio remains uninvested.