As of June 2026, mutual funds in India significantly lowered cash holdings by reducing their stake by over ₹4,500 crore and keeping cash levels at ₹1.83 lakh crore. That is the lowest cash balance in 19 months. It is a sign of the improving sentiment of fund houses in equities driven by a fall in geopolitical risks and crude oil prices.

Decline in cash holdings and equity market rally

According to data, the cash holdings of the mutual funds were cut in June to ₹1.83 lakh crore from ₹1.87 lakh crore in May. It is the lowest since November 2024 when cash was at ₹1.80 lakh crore. The cash holdings represented 4% of the AUM, which was less than 4.9% observed at the end of 2024.

The reduction in the cash holding was a result of the rise in domestic equity markets. The Sensex gained by 2.98% and the Nifty50 gained by 2.06% in June. The strength in the market was witnessed even in mid-cap and small-cap indices. Investor sentiment and investor confidence in the market outlook improved due to falling crude prices and de-escalating geopolitical tensions, and funds allocated additional funds to equities.

Divergence highlights and reducing cash holdings

Of the 50 fund houses, 29 reduced their stash of cash in June. SBI Mutual Fund suffered the maximum drop in cash holdings, reducing it to ₹22,083 crore from ₹26,851 crore. PPFAS Mutual Fund and Motilal Oswal Mutual Fund were next, with cash positions brought down to ₹1,997 crore and ₹1,903 crore, respectively. 

Bandhan Mutual Fund, HDFC Mutual Fund, Kotak Mutual Fund and Baroda BNP Paribas Mutual Fund also scaled down their cash holdings. There were smaller declines at Abakkus Mutual Fund, Helios Mutual Fund, JioBlackRock Mutual Fund, and Capitalmind Mutual Fund.

Most fund houses decreased cash, with 21 increasing cash. Quant Mutual Fund led the list with an increase of ₹1,825 crore in cash holdings, taking the amount to ₹14,007 crore. Similarly, Nippon India Mutual Fund and ICICI Prudential Mutual Fund upped the ante by depositing ₹1,809 crore and ₹1,501 crore of reserves, respectively. This separation underscores the different sentiments held by various fund houses, with some favoring liquidity even with the surge in the equities market.

The mutual funds’ cash balance of ₹1.83 lakh crore is the lowest since November 2024, when the cash balance stood at ₹1.80 lakh crore, that is, 4.98% of total funds. The decline in cash position reflects the general trend of the fund houses allocating cash to equity positions under the prevailing market conditions.

Conclusion

The massive cash allocation cut by the mutual funds in June 2026 illustrates their faith in the Indian stock markets. Fund houses are betting on continued market buoyancy amid de-escalation in the world and a decline in crude prices, as the cash amount has fallen to its 19-month low of ₹1.83 lakh crore. Most fund houses cut their cash positions to boost market exposure in equities, while a couple chose to build cash reserves to reflect the backdrop of volatility. The trend indicates a clear change toward equity stocks, suggesting that investors have a positive perception about the near-term prospects of the Indian markets.