AMC ready for deployment sitting on a pile of record cash

As of July, the cash as ratio of assets under management (AUM) of equity-oriented schemes was 57,045 crore, much higher than the five-year average 31,531 crore.

In relative terms, July’s 4.03% cash level is higher than the five-year average of about 3.58%, and the two-year average of 3%, data from the Anand Rathi Group shows.

Relatively high liquidity levels indicate that asset managers are not deploying funds aggressively, despite steady inflows through systematic investment plans. While net investment in equity schemes fell by 43% month-on-month in July, SIP inflows remained stable 12,140 crore, enabling overall equity inflows to remain in positive territory.

Firoz Aziz, deputy chief executive, Anand Rathi Wealth, said, “AMCs are holding onto cash to deploy as and when required. The inflows have been steady with the SIP numbers continuing to rise, which means there is a positive sentiment in the market. These flows are not being deployed aggressively.”

The popularity of equity investments of Mutual Funds through the SIP route and by HNI investors has acted as an effective counterweight to FII activity and brought some stability to the market. Between October and June, when foreign investors sold shares of 2.3 trillion, domestic institutional investors (DIIs) absorbed their sales by buying shares worth 3 trillion, effectively mitigating the downturn in the market. During this period, the cash levels of AMCs fell below the five-year average over several months (see table).

Thanks to this absorption by domestic investors, the Nifty fell 18% from high to low, outperforming indexes such as the Dow, which fell 20%, and the Hang Seng, which fell 30% in the same period.

In recent times, DIIs have been booking profits while FIIs have become net buyers of shares. DII sold shares in August 6,053 crore, even though FIIs have invested 51,200 crores.

The deployment is being cited by domestic investors as a structural shift in the Indian stock market that provides a floor to fall in a time of global uncertainty – the Dow 3% over the weekend after the Fed took a harsher tone on interest. And the Nasdaq fell 4%. rates.

“There is a floor for the market 14 trillion equity fund AUM,” said Nilesh Shah, Managing Director and CEO, Kotak AMC. “We can bring down the current liquidity level from 4% to 0.5% in the cheap market, approx. Rs 50,000 crore is being spent from the cash kept with AMCs in a falling market.

Amit Gupta, Vice President and Fund Manager, ICICI Securities PMS, said: “There is always a possibility of increasing volatility. But given the strong inflows through MFs and direct investments, we can be fairly sure of India’s continued outperformance. In the event of a global risk, we may risk a retest of June lows.”

first article