MFs reduce exposure to financials, stock up on IT

Financial sector stocks have fallen out of favour among equity fund managers of mutual funds. At the same time, fund managers have increased their technology holdings.

According to a report by mutual fund tracker Morningstar, equity mutual funds’ exposure to stocks of the financial sector in the September quarter declined to 21%.

“Allocation to the sector has dropped significantly from 26% at the end of previous quarter (June 2013), with interest rates hardening lately. The reason for the fall in exposure could be attributed to the sharp fall in price of banking and financial services stocks,” said analyst Dhruva Raj Chatterji in the report.

However, their exposure to technology stocks increased to 15.44% in the September quarter, up from 11.7% in the previous quarter. These stocks have been the investor favourites since the rupee decline began in June of this year.

“The sharp depreciation in the Indian currency (against the dollar) improved the prospects of technology stocks and other export oriented sectors, helping them rally strongly during the quarter,” said the report.

Healthcare was the other sector which saw a rise in holdings, while real estate continued to be the least held sector among equity fund managers.

Among stocks, Infosys was the most held stock during the period, pipping ICICI Bank, which was the most-held stock in the June quarter. Other popular technology stocks were TCS, HCL Technologies, Tech Mahindra and Wipro.

ICICI’s stock price fell by more than 17% during the quarter, and at the same time the total number of shares held in portfolios of equity funds dropped from 7.69 crore to 6.87 crore at the end of this quarter, the report added. State Bank of India was the most sold share as the stock price dropped by more than 17%.

HDFC Bank, HDFC, Lupin and Dr Reddys were the other stocks that found favour among investors.