In expensive markets, liquid funds tend to outperform the Nifty 50. Fund managers feel the right cash call can protect investors from the downside when the market falls, leading to a possibility of generating alpha. However, if the decision turns out contrary, it can impact returns.
In 2022, ICICI Prudential Bluechip Fund had a cash component of 9%— the last observed similar highs were in 2018. For fund managers at ICICI Prudential Mutual Fund, Indian markets were expensive and had almost peaked. The world was going through inflationary pressure, the Ukraine-Russia tension was almost a year old with no signs of resolution, and the interest rates in the US were rising. Hence, they took this big call on their equity funds.
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