Why PPFAS Flexi Cap Fund is holding cash even after a 10% fall -- Rajeev Thakkar explains

Parag Parikh Flexi Cap Fund (PPFCF), India’s largest flexi-cap mutual fund with assets of over ₹1.3 lakh crore, has sparked discussions among investors for maintaining nearly 19% cash levels despite market volatility and recent corrections. For many investors, a double-digit correction in markets often raises expectations that fund managers will aggressively deploy cash. However, Rajeev Thakkar, CIO and Director of PPFAS Mutual Fund, says the current positioning reflects valuation discipline rather than caution or pessimism.

Speaking on the issue, Thakkar clarified that the reported cash number can sometimes be misleading and may not necessarily indicate an active decision to sit on the sidelines.

“So cash percentage keeps moving up and down based on stock price movements,” Thakkar explained. He said that if a portfolio has 20% cash and 80% invested in stocks, a decline in equity prices automatically raises the apparent share of cash in the portfolio even if no additional money is moved into cash.

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According to him, this creates an optical effect where falling equity values can make cash holdings appear higher than they actually are in strategic terms.

PPFCF's focus

Despite perceptions that the fund is waiting on the sidelines, PPFCF has actively invested in opportunities during recent months. Thakkar highlighted that the fund deployed over ₹4,000 crore in March alone through selective large-ticket investments.

“We did a single transaction for ₹2,300 crore where we deployed in something that was of interest to us,” he said. “We have done another transaction of ₹900 crore single ticket.”

The emphasis, however, remains on selective deployment rather than investing cash simply because it is available.

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“We are not averse to deploying when opportunities come by. At the same time, just because we have cash we'll not forcefully deploy,” Thakkar said.

This reflects a long-standing principle followed by PPFAS—cash levels are often a residual outcome of valuation opportunities available in the market rather than a tactical call on where markets may move next.

Why a 10% correction was not enough

A major question from investors has been why PPFCF did not substantially reduce cash despite benchmark indices correcting around 10%.

Thakkar argued that not every decline creates an attractive buying environment.

“What people don't realize is that in global financial crisis 2008–09 the fall at the index level was 60%. In COVID the fall was 40%. This time the fall was not that big to start with,” he said.

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He also pointed out that market valuations before the correction were relatively expensive.

“A 10% fall is welcome if you are looking to deploy... but it is not that things were completely down and out or mouthwatering across the board,” he added.

In other words, the scale of decline must be viewed alongside starting valuations. A modest correction after a strong rally may not necessarily produce compelling value opportunities.

Investors haven’t necessarily lost out

PPFCF also argues that holding cash has not significantly hurt investors because broader markets have remained range-bound over the past 18 months.

“In the last 18 months Nifty 500... has gone nowhere,” Thakkar said, adding that debt instruments generated returns of roughly 7% annually during the period.

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For investors closely tracking fund positioning, PPFCF’s message is that patience remains central to its investment philosophy. Rather than chasing every correction, the fund prefers to wait for opportunities where valuations become significantly more attractive. In a market where many investors seek immediate action, PPFAS appears comfortable holding cash until conditions justify deploying it more aggressively.

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