Should you track your mutual fund's cash levels?

Subscribe to enjoy similar stories.As the Nifty 50 crashed more than 11% in March amid escalating tensions between the US, Iran and Israel, equity funds slashed their cash holdings throughout the month, aggressively buying into stocks at beaten-down prices. This widespread reduction in liquidity highlighted how differently fund managers utilize "dry powder" during a crisis.

While some moved with lightning speed to exhaust their cash, others had a more measured pace of deployment.Quant Mutual Fund captured the mood in a note to investors, saying it believes the current phase could emerge as the biggest buying opportunity since the covid period. The fund house said it was important to stay focused during extreme phases of market panic and euphoria to spot credible opportunities, and said this may be an appropriate time to rebalance portfolios more aggressively.Average cash allocations in most equity fund categories fell in March.

Small cap funds, which had the highest cash levels of 5.45% in February, pulled back to 5.33% in March. Flexi cap funds went from 5.04% cash in February to 4.21% in March.

Large cap funds reduced their cash holdings from 3.84% to 3.11%, and large & mid cap funds reduced theirs from 3.69% to 3.20%. Mid cap and multi cap funds held relatively steady, with mid cap moving from 3.44% in February to 3.64% in March, and multi cap shifting from 3.53% in February to 3.62% in March.At the fund level, Quant Mutual Fund exemplified the "all-in" approach, executing a massive tactical shift by nearly exhausting its cash reserves to capture the bottom.In contrast to Quant’s rapid-fire deployment, Parag Parikh Mutual Fund opting for a slow and steady entry.