The net investment of mutual fund houses in banking stocks rose in October, led by the rise in banking scrips that rose on better-than-expected results of some large banks and RBI?s measures to ease liquidity.
Mutual fund investments in banking stocks as a percentage of equity AUM rose 2.02% in October over the previous month to touch 17.77%, latest Sebi data shows.
Mutual funds marginally reduced their exposure to defensives such as pharmaceuticals and FMCG sectors by 0.78% and 0.76%, respectively during the month.
Exposure to financials was reduced by 0.32%.
In September, MFs? exposure in banking stocks had risen to R26,838 crore after touching the lowest level in four years of R22,744 crore in August.
MF exposure to banks stood at a high of R43,659 crore in December 2012.
In September, RBI governor Raghuram Rajan surprised the market with a 25 bps hike in the repo rate but eased short-term liquidity by reducing the MSF rates. He also took measures to ease the pressure on the domestic currency.
The rupee appreciated about 5% in September after Rajan announced steps to stabilise the Indian currency.
?Banking stocks did well in September and October. Also, the Q2 results for banks, especially large banks, was better than expected and the fund managers possibly rejigged their positions in the banking sector,? said Sadanand Shetty, VP & senior fund manager – equity, Taurus MF.
Banking stocks climbed in both September and October on value buying and RBI’s measures.
The BSE Bankex index surged by 6.4% and 19.4% in September and October.
The benchmark 30-scrip BSE Sensex rose 4% and 9.2% in the same period.
The spurt in the market could have also prompted fund managers to reduce allocation to defensive sectors.
?Considering the rally in the market, there could have been a minor asset allocation away from traditional defensive sectors to high beta sectors,? Shetty said.
MF investments in the banking sector stood at R32,808 crore in October, the highest since June. Other sectors where MFs had the highest investment included software (R25,185 crore), pharmaceuticals (R14,216 crore), consumer non-durables (R13,688 crore), petroleum products (R10,430 crore) and finance (R9,083 crore).
