Mutual funds betting dangerously high on banks: Assocham
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'MFs betting dangerously high on banks'

Mutual funds in the country are betting "dangerously high" on the banking stocks, claiming about 20 per of their portfolio allocations, according to an Assocham study.

  • New Delhi,  April 2, 2013  
  • |  
  • UPDATED   17:20 IST

Mutual funds in the country are betting "dangerously high" on the banking stocks, claiming about 20 per of their portfolio allocations amid concerns that the banks would post an erosion in the quarterly earnings.

According to the data analysed by Assocham for the last 12 months, mutual funds investment in banks stocks at the end of February stood at Rs 36,812 crore - 20.10 per cent of the industry's total equity assets under management (AUM) of Rs 1.83 lakh crore.

"MFs in India are betting dangerously high on banks' stocks which claim about 20 per of their portfolio allocations even amidst concerns that the banks would report a sharp erosion in their earnings in the fourth quarter of 2012-13, as they face squeeze in the net interest margins and increase in non-performing assets," the study said.

Apparently overlooking the underlying stress in the banking sector, the fund managers drove movement in the bank stocks which have gained about 9 per cent in the last financial year in the market.

"The kind of money pumped in the banking stocks in the context of stress on their assets seems illogical," it added.

It found that the entire fund deployment by the MFs is skewed in favour of a few sectors.

Besides being overweight on the banking portfolio, software and pharmaceuticals are the other two segments attracting much of the MF deployment.

In February, MFs invested Rs 19,123 crore in the software accounting for 10.40 per cent and pharma Rs 13,544 crore, or 7.40 per cent, of their total fund deployment in the stock market, the Assocham study added.

However, according to market regulator Securities and Exchange Board of India's (Sebi) data, exposure to the banking space declined from their highest level of 21.40 per cent seen in January.

Also, the absolute investments into banking shares declined to Rs 36,812 crore in February, from Rs 42,760 crore in January.

With inputs from PTI