MFs equity exposure to software companies at over 3-year high in March

NEW DELHI: The mutual fund (MF) industry is betting big on software companies with its equity exposure to the sector rising to three-and-a-half year high of Rs 19,196 crore in March 2013.

Also, MFs continued to raise their holdings in software companies for the fourth consecutive month in March.

The MF investment in software stocks at the end of March 2013 stood at Rs 19,196 crore, which was 10.73 per cent of the industry's total equity assets under management (AUM) of Rs 1.8 lakh crore, the Sebi data showed. In both absolute and percentage terms, this is the highest exposure of MFs to the software sector since August 2009.

The funds' sector-wise exposure data is not available before August 2009, when equity funds had invested Rs 11,913 crore (6.73 per cent of total equity AUM) in software sector. Prior to March's numbers, the MF industry had the highest exposure of 10.50 per cent in software space in December 2011.

In February, MFs held software stocks worth Rs 19,124 crore, which was 10.44 per cent of their total AUM.

In March 2012, MFs exposure to software space was Rs 18,173 crore which was 9.39 per cent of their total AUM.

Market participants attributed MFs' inclination towards software segment to weakness in the Indian currency coupled with good performance by IT companies. A weak rupee boosts value of dollars earned by IT firms.

"The mutual fund industry have been investing in the software shares because of weakness in rupee and smart quarterly numbers posted by companies such as TCS, Infosys and Wipro among others," Geojit BNP Paribas Financial Services Research Head Alex Mathews said.

Another key factor was expectation of good order books from the US companies, he said.

MFs had exposure of 20.11 per cent to banking stocks in March 2013, which was the highest among all sectors. However, the exposure to banking stocks declined from the highest level of 21.40 per cent of total AUM in January.

The absolute investment of Rs 35,967 crore into banking shares in March was also lower than Rs 42,760 crore inflows into the sector in January.

Among other sectors, exposure to pharmaceuticals was at Rs 13,630 crore or 7.62 per cent of AUM; consumer non-durables at Rs 12,435 crore (6.95 per cent); finance at Rs 9,938 crore (5.56 per cent), and petroleum products at Rs 9,158 crore (5.12 per cent).