Mutual fund industry investments: Exposure in IT sector soars to all time high in April

The mutual fund industry is betting big on IT firms as its equity exposure to the sector climbed to all-time high of nearly Rs 71,000 crore in April amid depreciating rupee and market volatility. Since January, MF houses have increased weight on the sector, which gets a major chunk of its revenues in US dollars.

MF's allocation to software stocks stood at Rs 70,773 crore as on April, accounting for 7.37 per cent of their total equity assets under management (AUM) of Rs 9.6 lakh crore, according to data available with the Securities and Exchange Board of India (Sebi).

In comparison, the exposure was at Rs 64,265 crore in March. It was at Rs 42,023 crore in April 2017. 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 that time, when the equity funds had deployed Rs 11,913 crore (6.71 per cent) in software shares.

This year has seen a consistent growth in investment in software stocks by equity fund managers with fund infusion growing from Rs 29,937 crore in January to Rs 70,773 crore in April.

Industry experts said that fund managers raised their allocation to software stocks due to declining rupee against the US dollar. Like exporters, IT companies earn majority of their revenue in dollars. Depreciating rupee means exporters get more rupee per US dollar. Indian rupee is currently hovering at around 68-level against dollar.

The BSE IT index jumped sharply by over 18 per cent per cent so far this year, while the BSE's benchmark Sensex grew by just 2.5 per cent during the period under.

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Among others, MFs have an exposure of Rs 96,727 crore in finance space, followed by consumer durables (Rs 64,476 crore), auto (Rs 55,370 crore), construction project (Rs 43,224 crore) and petroleum products (Rs 37,143 crore).