Big Mutual Funds Reduced Their Cash Holdings In May

One of the major trends witnessed in May 2025 was that the largest mutual fund houses in India have been reducing the size of their cash positions significantly. More than 60 percent of equity schemes experienced declines in their holdings, showing that the funds aggressively invest in the stock market, with a positive sentiment prevailing.

Cash Holdings Fall Over ₹7,600 Crore

According to data from PrimeMFdatabase.com, cash holdings across equity mutual fund schemes decreased by 4.4% month-on-month, falling from ₹1.73 lakh crore in April to ₹1.65 lakh crore in May. This brought cash levels as a percentage of equity AUM down from 3.92% to 3.56%.

Out of all the 43 mutual fund houses reviewed, 27 reduced their cash holdings while only 16 increased them. The biggest players in the industry have given the biggest cuts:

• ICICI Prudential Mutual Fund trimmed ₹3,025 crore
• SBI Mutual Fund slashed its cash pile by ₹3,839 crore
• Axis Mutual Fund and PPFAS Mutual Fund cut ₹2,821 crore and ₹2,460 crore, respectively
• Quant Mutual Fund reduced holdings by ₹1,597 crore

Top Gainers: HDFC MF, Kotak, and DSP Boost Liquidity

On the flip side, some fund houses increased cash allocations:

• HDFC Mutual Fund raised cash by ₹1,736 crore, the highest increase among peers
• Kotak Mahindra MF and DSP MF upped holdings by ₹1,007 crore and ₹760 crore, respectively
• Canara Robeco MF added ₹981 crore
• Bank of India MF more than doubled its cash reserves with a ₹255 crore addition, up 2.7 percentage points of equity AUM

Among smaller AMCs, Old Bridge MF recorded the sharpest jump in cash ratio, rising from 3.5% to 13.4%, while SAMCO MF cut its ratio from 8.1% to 1.9%.

Market Gains Fuel Confidence

The moves came amid buoyant market conditions. According to Bandhan Mutual Fund, India outperformed global peers over the three-month period ending May 2025, with a 16% gain compared to just 5% in emerging markets and 2% in world/developed market indices.

In May alone, domestic equity AUM (including ELSS and index funds) rose 4.7% month-on-month to ₹351 crore, driven by gains of 1.8% and 1.5%, respectively, on the Nifty 50 and Sensex.

This significant shift in mutual fund cash strategy reflects growing conviction in Indian equity markets, even as some players remain cautious amid valuation concerns.

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