Mutual funds ramped up their allocation for IT stocks to over Rs 40,000 crore at April-end in view of a weakening rupee, which adds to IT exporters’ profitability.
In comparison, equity fund managers’ deployment in software stocks was Rs 34,100 crore in April last year.
According to industry experts, fund managers have been raising their allocation in software stocks due to the declining rupee against the US dollar.
About 85 per cent of the IT service companies’ revenues come from exports, especially the US and Europe. A strong dollar boosts their earnings in rupee terms.
The rupee depreciated 4.8 per cent against the US dollar between April 2015 and the same month this year. It is currently hovering at the 67 level.
As per data available with the Securities and Exchange Board of India (Sebi), overall deployment of equity funds in software stocks stood at Rs 40,194 crore last month. In January, funds allocation had touched an all-time high of over Rs 43,115 crore.
MFs’ exposure to software stocks was at 9.54 per cent of their overall investments last month, compared with 9.43 per cent in April 2015.
For April, IT remained the second-most preferred sector with fund mangers after banks. Deployment of equity funds in traditional investment sectors like banking stocks was at Rs 85,330 crore during the period under review.
MFs have an exposure of Rs 32,820 crore in pharma firms, followed by automobiles (Rs 28,563 crore) and finance (Rs 26,560 crore).
The BSE IT index surged 8.8 per cent in the last one year while the BSE Sensex fell 5.2 per cent during the same period.
MFs are investment vehicles made up of a pool of funds collected from a large number of investors. The money is invested in stocks, bonds and money market instruments, among others.