Big Mutual Funds Reduce Cash Holdings in May 2025; Over 60% of Equity Schemes Show Decline

In a notable shift, equity mutual fund schemes saw a 4.4% decline in cash holdings in May 2025, pointing towards growing confidence in the stock market. According to data from PrimeMFdatabase.com, the total cash held by these schemes fell by ₹7,607 crore, dropping from ₹1.73 lakh crore in April to ₹1.65 lakh crore in May.

This reduction in cash positions suggests that fund managers are increasingly deploying idle capital into equity markets, taking advantage of opportunities amid improved market sentiment.

Over 60% of Equity Schemes Cut Cash Levels

More than 60% of equity mutual fund schemes reduced their cash exposure during the month, indicating a broad-based move across the fund industry.

As a proportion of equity assets under management (AUM), cash levels declined to 3.56% in May, down from 3.92% in April. This metric highlights a stronger conviction among fund houses in equities over holding cash buffers.

The trend signals that mutual funds are positioning themselves more aggressively in the market, reducing their conservative cash stance that had been maintained in previous months due to global uncertainty and market volatility.

What This Means for Investors

For retail investors, the move by big mutual funds to trim cash holdings can be seen as a vote of confidence in the Indian equity market. Fund managers appear to be anticipating potential upside and are aligning their portfolios accordingly.

While individual strategies may differ, the overall reduction in cash reflects a bullish sentiment, possibly driven by domestic macroeconomic resilience, corporate earnings, or improved liquidity conditions.

Conclusion

The steady deployment of capital by mutual funds in May 2025 and the dip in cash holdings underscore a shift toward growth-focused strategies. With over 60% of equity schemes reducing their cash positions, it’s clear that many asset managers are increasingly optimistic about the near-term outlook of Indian equities.

Investors may interpret this trend as a signal to stay invested or even increase exposure—but as always, investment decisions should align with personal risk profiles and financial goals.

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