MFs' exposure to IT stocks at all-time high of Rs 27.7k cr

Weakness in rupee, demand revival in the US and good quarterly results seen as reasons

The mutual fund (MF) industry is betting big on software companies, as its equity exposure to the sector climbed to an all-time high of Rs 27,772 crore at the end of January 2014.

MFs’ investment in software stocks stood at Rs 27,772 crore as on January 31, 2014, accounting for 15.20 per cent of their total equity assets under management (AUM) of Rs 1.83 lakh crore, according to the Securities and Exchange Board of India (Sebi) data.

In December, the investment of mutual funds in software companies was at Rs 26,762 crore (13.84 per cent).

Market participants attributed this continued inclination of MFs towards the software segment to weakness in the rupee, revival of demand in key markets like the US and good performances by information technology (IT) companies in the past few quarters.

A weak rupee boosts value of dollars earned by IT firms.

Deployment of funds by MFs in software stocks gained traction since May when the rupee came under pressure.

The Indian currency has depreciated by around 15 per cent since April 30. “The MF industry has been investing in the software shares because of weakness in the rupee and smart quarterly numbers posted by companies such as TCS, Infosys and Wipro, among others,” Geojit BNP Paribas Financial Services research head Alex Mathews said.

Another key factor was revival of demand in major markets, he added.

MF is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

MFs had exposure of 16.60 per cent to banking stocks in January 2014, which was the highest among all sectors. In terms of absolute numbers, mutual funds investment to the banking space stood at Rs 30,339 crore.