MFs exposure to bank stocks hits record-high of Rs 55,000 cr

Mutual fund invetsments in software stocks, second most preferred sector after banking reached Rs 26,595 crore

Mutual fund managers raised their exposure in bank stocks to an all-time high of nearly Rs 55,000 crore in June this year amidst soaring equity market.

According to the latest data available with market regulator Sebi, mutual fund (MF) investments in banking stocks reached Rs 54,746 crore as on June 30, 2014, accounting for 21.5% of their total equity assets under management (AUM) of Rs 2.55 lakh crore.

This was also the fifth consecutive monthly rise in exposure.

After banking, software is the second most preferred sector with MFs having exposure of Rs 26,595 crore, followed by pharmaceuticals (Rs 16,834 crore) and finance (Rs 13,736 crore).

At current levels, the MF industry has the highest exposure to banking sector since August 2009. Data is not available for sector-wise exposure before August 2009, when the equity funds had deployed Rs 22,587 crore (12.73%) in banking shares.

The previous high was in May this year when investment in the sector had risen to Rs 48,419 crore.

Mutual funds are investment vehicles made up of a pool of funds collected from a large number of investors. MFs invest in stocks, bonds, money market instruments and similar assets.

According to market participants, MFs have been showing interest in banking stocks since the beginning of the year amidst rising equity market.

Meanwhile, the banking index (bankex) surged over three% in June this year, while the 30-scrip BSE Sensex rose 5%.

The year 2014 has seen a consistent growth in investment in banking stocks by equity fund mangers and their exposure has risen from 16.6% of total AUM in January to 21.5% in June.

In absolute terms, fund infusion has grown from Rs 30,339 crore to Rs 54,746 crore.