Friday, October 23, 2009

Cash level of equity funds lowest since Jan ’08 peak

After a swift rise in share prices since early March, cash available with equity mutual funds has fallen below 7 per cent of assets under management, a level last seen during the market peak in January 2008.
Even till April end, equity fund managers were cautious and held 14.35 per cent of their assets in cash. The scenario changed after the Congress-led alliance won a comfortable majority in general elections boosting investors’ confidence in political stability in the country.
Between April 30 and September 30, cash available with 297 open-ended equity schemes declined from Rs 14,637.18 crore to Rs 9,675.15 crore, data available from Delhi-based mutual fund tracking firm Value Research showed. During this period, cash as a percentage of total equity assets declined from 14.35 per cent to 6.25 per cent.
“Markets are buoyant, so obviously we have to invest,” said Satish Ramna­than, head of equities at Sundaram BNP Paribas Asset Management.
The benchmark Sensex of the Bombay Stock Exchange (BSE) has gained 108.61 per cent in this year so far since closing at a three-year low of 8,160.40 on March 9.
The market rally has forced many fund managers to cut their high cash levels and chase the returns, said head of equities of a mutual fund house, who wished not to be identified. “The conviction in the market is because of momentum and not valuations,” he said.
The low level of cash among Indian equity mutual funds also gives some indication of present domestic sentiment, believes Jyotivardhan Jaipuria, head of research at foreign brokerage Bank of America (BoA) Merrill Lynch.
“These low levels of cash were last seen at the peak of the markets in January 2008. While insurance companies are bigger buyers than mutual funds, it does indicate that buying from domestics will be lower going forward,” he said in a strategy note to clients.
Most market experts are also of the view that valuations are now running ah­ead of fundamentals and the rally is largely driven by liquidity. “Valuations are rich,” said Ramnathan of Sundaram BNP Paribas, who has a “neutral” stance on the market. At Wednesday’s close of 17,023.18, the 30-stock Sensex quoted at 19.89 times its expected earnings per share of Rs 856.04 for the financial year ending March 31, 2010, according to Bloomberg. This is higher than the benchmark’s long-term average price-to-earnings (P/E) multiple of about 15 times.

No comments:

Just click away from joining most active Mutual Fund India google group

Google Groups
Subscribe to Mutual Fund india
Email:
Visit this group

Aggrasive Portfolio

  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
  • Reliance Growth Fund (Stock Picker Fund) 11%
  • IDFC Premier Equity Fund (Stock picker Fund) (STP) 11%
  • HDFC Equity Fund (Mid cap Fund) 11%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 10%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund) 8%
  • Fidelity Special Situation Fund (Stock picker Fund) 8%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Moderate Portfolio

  • HDFC TOP 200 Fund (Large Cap Fund) 11%
  • Principal Large Cap Fund (Largecap Equity Fund) 10%
  • Reliance Vision Fund (Large Cap Fund) 10%
  • IDFC Imperial Equity Fund (Large Cap Fund) 10%
  • Reliance Regular Saving Fund (Stock Picker Fund) 10%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 9%
  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Conservative Portfolio

  • ICICI Prudential Index Fund (Index Fund) 16%
  • HDFC Prudence Fund (Balance Fund) 16%
  • Reliance Regular Savings Fund - Balanced Option (Balance Fund) 16%
  • Principal Monthly Income Plan (MIP Fund) 16%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Principal Large Cap Fund (Largecap Equity Fund) 8%
  • JM Arbitrage Advantage Fund (Arbitrage Fund) 16%
  • IDFC Savings Advantage Fund (Liquid Fund) 14%

Best SIP Fund For 10 Years

  • IDFC Premier Equity Fund (Stock Picker Fund)
  • Principal Emerging Bluechip Fund (Stock Picker Fund)
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund)
  • JM Emerging Leader Fund (Multicap Fund)
  • Reliance Regular Saving Scheme (Equity Stock Picker)
  • Biral Mid cap Fund (Mid cap Fund)
  • Fidility Special Situation Fund (Stock Picker)
  • DSP Gold Fund (Equity oriented Gold Sector Fund)