The mutual fund industry is betting big on software companies as its equity exposure to the sector climbed to an all-time high of Rs 29,688 crore at the end of August. This also marks the third consecutive rise in mutual fund (MF) industry’s exposure to software stocks. Mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
The funds’ investment in software stocks stood at Rs 29,688 crore as on August 31, 2014, accounting for 10.53 percent of their total equity assets under management (AUM) of Rs 2.81 lakh crore, according to data with the Securities and Exchange Board of India (Sebi). In comparison, MFs had deployed Rs 27,596 crore in the shares of software companies in July. At current levels, the MF industry has the highest exposure to software sector since August 2009. Data is not available for sector-wise exposure before August 2009, when the equity funds had deployed Rs 11,913 crore (6.71 percent) in software shares.
The previous high was in February this year when investment in the sector rose to Rs 28,784 crore. According to market participants, MFs have been showing interest in software stocks since the beginning of the year amid rising equity market. They believe that the ongoing market rally might see mutual fund assets getting diversified. Meanwhile, the IT index surged by 3.52 percent, while the benchmark Sensex witnessed a gain of 2.86 percent in August.
This year has seen a consistent growth in investment in software stocks by equity fund managers and fund infusion has grown from Rs 27,772 crore in January to Rs 29,688 crore in August. Besides, mutual fund managers raised their exposure in bank stocks to an all-time high of over Rs 56,600 crore in August this year, which is the highest among all the sectors. Among others, MFs have an exposure of Rs 19,394 crore in pharma space, followed by auto (Rs 17,754 crore) and finance (Rs 15,116 crore).