Mutual Funds Betting Dangerously High On Banks: Assocham


Mutual Funds Betting Dangerously High On Banks: Assocham

New Delhi: 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 a study by Assocham.

As per data analysed by the Assocham for the last 12 months, Mutual funds investment in the banks stock at the end of February stood at 36,812 crore, which was 20.10 per cent of the industry's total equity assets under management (AUM) of 1.83 lakh crore.

However, as per market regulator Sebi's 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 also declined to 36, 812 crore in February, from 42, 760 crore in January. "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 nine per cent in the last fiscal 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 19,123 crore in the software accounting for 10.40 per cent and pharma 13,544 crore, or 7.40 per cent, of their total fund deployment in the stock market, the study added.

Also Read:

Households Need To Be Incentivised For Savings: Rajan

IRDA Asks Firms to File Product Planners for Quick Approval

Source: PTI