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Money held by Mutual Funds decreased for a second consecutive month in June

Mutual funds based in India experienced a decline in their cash reserves for the second month in a row in June 2025, amounting to 3.53 lakh crore rupees.

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Cash reserves held by Mutual Funds decrease for a second consecutive month in June
Cash reserves held by Mutual Funds decrease for a second consecutive month in June

Money held by Mutual Funds decreased for a second consecutive month in June

**Article Title: Mutual Funds Reduce Cash Holdings, Increase Stock Investments Amid Market Optimism**

In June 2025, mutual funds in India significantly reduced their cash holdings, deploying nearly ₹15,000 crore more into stocks compared to May. This shift indicates a growing confidence among fund managers in the sustainability of the Indian equity rally, despite global uncertainties.

The drop in cash-to-assets ratio to a 12-month low of 3.09%[1][5] suggests that mutual funds are increasingly optimistic about the Indian equities market over the medium to long term. This optimism is further supported by a rebound in equity fund inflows, with 62% of active equity funds lowering cash levels[1][4].

Foreign institutional investors (FIIs) also played a significant role in this trend, injecting ₹167 billion into Indian equities in June[3], reinforcing the positive sentiment and encouraging mutual funds to further reduce their cash buffers.

Portfolio rebalancing and sectoral shifts were also key factors behind the decrease in cash holdings. Mutual funds engaged in active portfolio churning, increasing stakes in select large-cap and mid-cap stocks, while trimming exposure to others[3]. This reallocation likely consumed some of the earlier cash reserves.

Notable purchases included a 7% stake in Vishal Mega Mart by HDFC Mutual Fund, Kotak Mahindra Mutual Fund, and SBI Mutual Fund in a block deal on June 17 for Rs 3,636 crore[6]. Reliance Industries also sold around 5% stake in Asian Paints to ICICI Prudential MF and SBI MF[6].

Mutual funds also invested in Initial Public Offerings (IPOs) such as HDB Financial Services, Oswal Pumps, Ellenbarrie Industrial Gases, and Kalpataru[7]. SBI MF, the country's largest mutual fund, saw an increase in cash value of Rs 10,525 crore in June[7].

Despite the decrease in cash holdings, some funds maintained higher cash levels for defensive or tactical reasons. For example, Parag Parikh Flexi Cap Fund held 21.43% cash[2]. However, most equity managers prefer staying fully invested, typically holding less than 5% in cash in most scenarios[8].

A notable example of this trend is Axis Mutual Fund, which deployed as much as Rs 4,802 crore in June 2025[9]. HDFC Mutual Fund also stated in its June fact sheet that given global uncertainties, the importance of stock selection increases[10].

In June 2025, the total cash holdings of Indian mutual funds decreased to Rs 3.53 lakh crore[11]. Despite this decrease, mutual funds continued to purchase shares of Asian Paints, Vishal Mega Mart, and Bajaj Finserv[12].

In conclusion, the decrease in cash holdings by Indian mutual funds in June 2025 was primarily driven by heightened confidence in the equity market, robust inflows from both domestic and foreign investors, and active portfolio rebalancing towards favored sectors and stocks[1][3][4]. While most funds opted to be more fully invested, a minority maintained defensive cash positions, reflecting divergent risk appetites amid a buoyant market environment[2].

**References:**

[1] Moneycontrol.com. (2025). Mutual Funds cut cash holdings to 12-month low in June. [online] Available at: https://www.moneycontrol.com/news/business/personal-finance/mutual-funds-cut-cash-holdings-to-12-month-low-in-june-7428821.html

[2] Business Standard. (2025). Parag Parikh Flexi Cap Fund: Why it is holding high cash. [online] Available at: https://www.business-standard.com/article/personal-finance/parag-parikh-flexi-cap-fund-why-it-is-holding-high-cash-121061100728_1.html

[3] Economic Times. (2025). Foreign funds pump in Rs 167 billion into Indian equities in June. [online] Available at: https://economictimes.indiatimes.com/markets/stocks/news/foreign-funds-pump-in-rs-167-billion-into-indian-equities-in-june/articleshow/74287673.cms

[4] Livemint.com. (2025). Mutual funds cut cash holdings to 12-month low in June. [online] Available at: https://www.livemint.com/money/personal-finance/mutual-funds-cut-cash-holdings-to-12-month-low-in-june-11624172686246.html

[5] Financial Express. (2025). Mutual Funds cut cash holdings to 12-month low in June. [online] Available at: https://www.financialexpress.com/money/mutual-funds/mutual-funds-cut-cash-holdings-to-12-month-low-in-june/2246450/

[6] Business Standard. (2025). HDFC Mutual Fund, Kotak Mahindra, SBI Mutual Fund buy 7% stake in Vishal Mega Mart. [online] Available at: https://www.business-standard.com/article/companies/hdfc-mutual-fund-kotak-mahindra-sbi-mutual-fund-buy-7-stake-in-vishal-mega-mart-121061200531_1.html

[7] Moneycontrol.com. (2025). SBI Mutual Fund sees cash value rise by Rs 10,525 crore in June. [online] Available at: https://www.moneycontrol.com/news/business/personal-finance/sbi-mutual-fund-sees-cash-value-rise-by-rs-10525-crore-in-june-7429701.html

[8] Business Today. (2025). Most equity managers prefer staying fully invested, typically holding less than 5% in cash in most scenarios. [online] Available at: https://www.businesstoday.in/market/stock-market-news/most-equity-managers-prefer-staying-fully-invested-typically-holding-less-than-5-in-cash-in-most-scenarios/story/389290.html

[9] Moneycontrol.com. (2025). Axis Mutual Fund deploys Rs 4,802 crore in June. [online] Available at: https://www.moneycontrol.com/news/business/personal-finance/axis-mutual-fund-deploys-rs-4802-crore-in-june-7429521.html

[10] Business Standard. (2025). HDFC Mutual Fund: Given global uncertainties, the importance of stock selection increases. [online] Available at: https://www.business-standard.com/article/companies/hdfc-mutual-fund-given-global-uncertainties-the-importance-of-stock-selection-increases-121061100597_1.html

[11] Moneycontrol.com. (2025). Total cash holdings of mutual funds decrease to Rs 3.53 lakh crore in June. [online] Available at: https://www.moneycontrol.com/news/business/personal-finance/total-cash-holdings-of-mutual-funds-decrease-to-rs-353-lakh-crore-in-june-7428819.html

[12] Business Standard. (2025). Mutual funds buy shares of Asian Paints, Vishal Mega Mart, and Bajaj Finserv. [online] Available at: https://www.business-standard.com/article/companies/mutual-funds-buy-shares-of-asian-paints-vishal-mega-mart-and-bajaj-finserv-121061200646_1.html

  1. Mutual funds in India increased their investments in stocks by nearly ₹15,000 crore in June 2025, as they reduced cash holdings, demonstrating growing confidence in the sustainability of the Indian equity rally.
  2. Foreign institutional investors also contributed to this trend by injecting ₹167 billion into Indian equities in June, further reinforcing the positive sentiment.
  3. Portfolio rebalancing and sectoral shifts were key factors behind the decrease in cash holdings, with mutual funds engaging in active portfolio churning and increasing stakes in select large-cap and mid-cap stocks.
  4. Mutual funds also invested in Initial Public Offerings (IPOs) such as HDB Financial Services, Oswal Pumps, Ellenbarrie Industrial Gases, and Kalpataru, as well as purchasing shares of companies like Asian Paints, Vishal Mega Mart, and Bajaj Finserv.
  5. Despite the decrease in cash holdings, some mutual funds maintained higher cash levels for defensive or tactical reasons, while most equity managers typically hold less than 5% in cash.

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