MUTUAL FUNDS HIKES EXPOSURE TO BANKS

Cashing in on the good equity market conditions, fund managers' raised their exposure to bank stocks to more than Rs 26,800 crore in September over the preceding month. According to the latest data available with Sebi, the mutual fund (MF) industry's investment in banking stocks stood at Rs 26,838 crore as on September 30, accounting for 15.75 per cent of their total equity assets under management (AUM) of Rs 1.70 lakh crore. In August, mutual funds' exposure to banking stocks had touched the lowest level in four years to Rs 22,744 crore. However, the investment had risen to as high as Rs 43,659 crore in December 2012. Market participants attributed the increase in investment in banking shares to measures announced by the new Reserve Bank of India (RBI) chief Raghuram Rajan coupled with overall surge in the stock market.
Banking stocks climbed in September, after falling for four consecutive months, on value buying and a slew of measures announced by the RBI. During September, the banking index (bankex) surged by 6.4 per cent, while the 30-scrip sensitive index (Sensex) rose four per cent. Rajan, in September, had announced steps to stabilise the Indian currency and liberalise the banking system, including higher overseas borrowing limits for lenders and simpler processes for opening branches.
Mutual funds are 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 consistent investment growth in banking stocks by the industry's equity fund managers and their exposure had risen from 17.23 per cent of total AUM in January 2012 to 21.15 per cent in December. The increase in allocation of funds to banking stocks in 2012 was largely attributed to declining interest rates. In September this year, banking was followed by software space where the mutual funds' investment stood at Rs 23,797 crore. While the consumer non durables accounted for Rs 13,921 crore, pharma stood at Rs 14,444 crore and petroleum products at Rs 9,933 crore.