Mutual funds' exposure to bank stocks hits 19-month low
Fund managers' exposure to the banking sector has dropped to the lowest level in more than one-and-half years, according to latest data available with Sebi.
Mutual Fund (MF) industry's investment in banking stocks stood at Rs 28,862 crore as on July 31, accounting for 16.93 per cent of their total equity assets under management (AUM) of Rs 1.70 lakh crore.
This was their lowest exposure in the banking shares since December 2011, when the total value of mutual fund investments in banking sector stood at Rs 26,335 crore. A year later in December 2012, mutual funds' exposure in banking stocks had risen to as high as Rs 43,659 crore.
Market participants attributed the decline in investment in banking shares to overall volatility in equity market. Banking stocks have under-performing broader market because of liquidity pressure due to various steps announced by the Reserve Bank and deteriorating asset quality of public sector banks, market analysts said.
Besides, profitability of various public sector banks has also declined because of higher provisioning.
During July, banking index (Bankex) crashed by more than 14 per cent, while 30-scrip sensitive index (Sensex) dropped by 1.2 per cent.
Despite reduction in exposure, banking stocks continue to remain the most preferred sector for mutual funds, followed by software (Rs 22,009 crore accounting for 12.91 per cent exposure), pharma (Rs 13,997 crore or 8.21 percent), consumer non-durables (Rs 13,258 crore or 7.78 per cent) and petroleum products (Rs 9,979 crore or 5.85 per cent).