Mutual fund managers continued to be bullish on bank shares, as their allocation to the sector reached an all time-high of Rs 1.47 lakh crore at the end of June, mainly due to cheaper valuations. This also marks the sixth consecutive monthly rise in the mutual funds’ exposure to bank stocks. In comparison, the figure was Rs 93,885 crore at the end of June 2016. Banking continues to be the most preferred sector with the fund managers, given the high weightage attached to the index.
Kaustubh Belapurkar, Director Manager Research at Morningstar Investment Adviser, said mutual funds (MFs) have been adding exposure to the financial sector, primarily banking stocks because of lower valuations due to price corrections coupled with growth in corporate lending. “Besides, bank’s NPA (non-performing asset) problem is getting sorted out,” he added.
Further, analysts expect that bank stocks will continue to be in focus in coming months as markets regulator Sebi last month decided to ease its takeover norms for restructuring listed companies with stressed assets. The relaxation will exempt investors from making a mandatory open offer subject to shareholders’ nod and some other conditions.
Sebi’s decision on restructuring in stressed firms comes against the backdrop of the government and the Reserve Bank of India (RBI) stepping up efforts to tackle the menace of bad loans, amounting to more than Rs 8 lakh crore. Overall, the deployment of equity funds in bank stocks stood at Rs 1,46,861 crore at the end of June 2017, compared to previous high of Rs 1,43,704 crore in the preceding month, latest data available with Sebi showed.
Bank is followed by finance stocks, wherein equity fund managers’ deployment was at Rs 53,186 crore, software (Rs 43,949 crore) consumer non-durables (Rs 43,733 crore) and auto (Rs 42,405 crore). Mutual funds are investment vehicles made up of a pool of funds collected from a large number of investors. They invest in stocks, bonds, money market instruments and similar assets.