MFs lower exposure to bank stocks on higher NPAs

Mutual funds lowered allocation to banking stocks by Rs 6,662 crore (nearly $1 billion) to about Rs 78,600 crore in January, primarily on account of mounting bad loans of public sector banks. Fund managers have been continuously trimming allocation to banking stocks since November, lowering exposure by over Rs 9,000 crore in two months. “In recent months, banking stocks, specially public sector banks like PNB and Bank of Baroda have declared massive NPAs (as part of the RBI’s push to clean the banking system) leading to downgrade in their stocks. Consequently, MFs have reduced their exposure to such banking stocks as they are no longer growth bets for the short term,” Wealthforce.com Founder Siddhant Jain said. “However, due to the sheer size of the financial sector in India, MF exposure to this sector is still the highest as compared to others such as auto and software and also because in the long run, finance/banking is a major part of the growth story which is India,” he added. In percentage terms, exposure to banking stocks was at 19.24 per cent of equity AUM last month as against 19.97 per cent in December.Overall deployment of equity funds in bank stocks stood at Rs 78,644 crore at the end of January as compared with Rs 85,306 crore in the preceding month, as per the data available from Securities and Exchange Board of India (Sebi).