MFs reduce exposure to banking stocks by 2% in May

Market participants attributed the decline in investment in banking shares to overall volatility in equity market

Mutual funds (MFs) reduced their holdings in banking stocks by 2.4 per cent in May compared to the previous month. The investment in banking stocks was 20.1 per cent of MFs’ total equity assets under management (AUM) of Rs 1.87 lakh crore in May, according to Securities and Exchange Board of India (Sebi) data.

MFs’ investment in banking shares was at Rs 38,572.41 crore at April-end, which was 20.84 per cent of the industry's total AUM. This marks a steep decline from the Rs 43,659 crore parked in banking shares in December 2012.

In terms of percentage, too, MF exposure to banks had fallen from its peak level of 21.4 per cent seen at the end of January.

Market participants attributed the decline in investment in banking shares to overall volatility in the equity market.

Banking is the only sector to log double-digit exposure. Software is the second most preferred sector, with MFs having 9.39 per cent exposure, followed by consumer non-durables (7.53 per cent) and pharmaceuticals (7.48 per cent).

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.

In 2012, there was a consistent growth in investment in banking stocks by the industry's equity fund managers and their exposure has risen from 17.23% of total AUM in January 2012 to 21.15% in December.

In absolute terms, fund infusion has grown from Rs 32,380 crore to Rs 43,659 crore. The increase in allocation by fund managers to the banking sector could be attributed to interest rates declined during the year.

In May, banking was followed by software sector which attracted Rs 17,587 crore or 9.39% of AUM, consumer non durables witnessed a deployment of Rs 14,109 crore or 7.53% of the AUM.

Pharma saw an investment of Rs 14,010 crore or 7.48% of AUM and finance witnessed an investment of Rs 10,849 crore or 5.79% of AUM.