Mutual Funds' exposure in banking stocks hit 4-month high

Fund managers raised exposure inbank stocks to 4-month high of nearly Rs 33,000 crore inOctober amid rising equities market and various steps taken bythe Reserve Bank to prop the banking sector.

According to the latest data available with marketregulator Sebi, Mutual Fund investments in banking stocksreached Rs 32,807 crore as on October 31, accounting for 17.77percent of their total equity assets under management (AUM)of Rs 1.85 lakh crore.

This was the highest level since June, when fund managershad shored-up their investment in banking shares to Rs 35,442

crore.

[caption id=“attachment_1246877” align=“alignleft” width=“380”]  Reuters[/caption]

In September, MFs’ exposure in banking stocks increased toRs 26,838 crore after touching the lowest level in four years,at Rs 22,744 crore, in August.The investment had risen to a high of Rs 43,659 crore inDecember 2012.

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Market participants said MFs have shown interest in thebanking stocks during the past two months (September-October)primarily on account of measures announced by the new ReserveBank Governor Raghuram Rajan coupled with overall surge inthe stock market.

Banking stocks climbed in October for the secondconsecutive month on value buying and a slew of RBI measures.The banking index (bankex) surged by 19.4 percent inOctober, while the 30-scrip BSE sensitive index (Sensex) rose9.2 percent.

In September, Rajan had announced steps to stabilise theIndian currency and various steps to liberalise the bankingsystem, including higher overseas borrowing limits for lendersand simpler processes for opening branches.

Banking was followed by software sector, where MFinvestments stood at Rs 25,185 crore. Pharma stocks accountedfor Rs 14,216 crore, while consumer non-durables attracted Rs13,688 crore and petroleum products at Rs 10,430 crore.

Mutual Funds are investment vehicles made up of a pool offunds collected from a large number of investors. MFs investin stocks, bonds, money market instruments and similar assets.In 2012, there was consistent investment growth inbanking stocks by the industry’s equity fund managers andtheir exposure had risen from 17.23 per cent of total AUM inJanuary 2012 to 21.15 percent in December.

The increase in allocation of funds to banking stocks in2012 was largely attributed to declining interest rates.

PTI