During the review period, the total bank balance of the funds increased to Rs 14.31 billion compared to Rs 13.12 billion in the end of the last FY. This is mainly due to the strategy of avoiding market risk, strengthening cash reserves by cutting unsecured investments, and waiting for opportunities in the future. This data shows that fund managers prefer to keep their capital safe and cash rather than investing indiscriminately when the share price is not known in the market.
There are four main reasons behind the increase in the bank balance of mutual funds by such extent. First of all, there is a wait-and-see situation in the market right now. Since market indices and share prices fluctuate, it is considered wise to keep most of the money in the bank rather than taking hasty risks. If the market falls and the stock is available at a cheap price in the future, it is necessary to have enough cash in the bank to put money in the market immediately.
Second, the funds have withdrawn money from risky or dormant sectors and deposited it in banks. Investment in unlisted shares declined by 33.06 percent to Rs 903.1 million till Shrawan. Millions of money that has come out of the same unlisted sector has been diverted by the funds to safe fixed deposits and bank accounts, which has led to a sudden increase in bank balances.
The third reason is the obsession with fixed interest income. Funds have deposited some of the money in deposits as they get a fixed interest rate without risk from banks and financial institutions. As a result, the amount deposited in fixed deposits has increased by 22.73 percent to Rs 864 million. Funds are also obliged to save money in banks to avoid market volatility and pay regular dividends to investors.
The fourth and final aspect is the preparation of compliance with the rules and distribution of dividends. Funds must also strengthen cash to provide timely returns to unit owners and to pay off other obligations. Due to these various internal and external factors, the money has been deposited in the bank accounts of the mutual investment funds.
There has been an increase in the amount of money in the bank as well as the amount kept in fixed deposits. Fixed deposits have increased from Rs 704 million in Ashar to Rs 864 million in Shrawan. This shows that the funds are on a safe path to recovery. On the other hand, the investment in the shares of the listed companies reached Rs 68.20 billion. Only a modest increase of 79 percent has been seen. As a result, it is clear that most of the money is not in the stock market, but most of the money is stuck in the bank.
In terms of net worth per unit (NAV), certain mutual funds have shown excellent financial strength till Shrawan. According to the available data, Prabhu Smart Fund with a NAV of Rs 14.03 has been ranked the top in this index. Immediately after that, 13. Prabhu Select Fund with a NAV of Rs 9 and Kumari Dhanvriddhi Yojana with a NAV of Rs 12.02 are also leading the market. Similarly, Himalayan 80-20 has a NAV of 12.54 while some other schemes have also managed to maintain a high NAV.
