The mutual fund industry is betting big on the software sector with equity exposure at over Rs 19,000 crore - the highest amount in three and a half years.
According to latest data available with the market regulator Sebi, mutual fund investment in software stocks at the end of February 2013 stood at Rs 19,124 crore, which was 10.44% of the industry's total equity assets under management (AUM) of Rs 1.83 lakh crore.
This is the highest exposure to software sector since at least August 2009 in absolute terms and the second-highest in percentage terms.
The funds' sector-wise exposure data is not available before August 2009, when equity funds had invested Rs 11,913 crore (6.73% of total funds) in software sector.
In percentage terms, the MF industry had the highest exposure of 10.50% to software space in December 2011.
Market participants attributed MF's inclination towards software segment to weakness in Indian currency coupled with good performance by IT companies. A weak rupee boosts the value of dollars earned by IT firms.
"The mutual fund industry has been investing in the software shares because of weakness in Rupee and smart quarterly numbers posted by companies such as TCS and Infosys among others," Geojit BNP Paribas Financial Services Research Head Alex Mathews said.
Another key factor was expectation of good order books from the US companies, he said.
Banking stocks account for the highest exposure for mutual fund investors among all the sector and is the only other segment to log double-digit exposure. Mutual funds had 20.1% exposure to banking stocks at the end of February 2013.
However, exposure to the banking space declined from their highest level of 21.40% seen in January.
The absolute investments into banking shares also declined to Rs 36,812 crore in February, from Rs 42,760 crore in January.
Among other major sectors, pharmaceuticals' exposure was Rs 13,545 crore or 7.40% of AUM, consumer non-durables Rs 12,216 crore (6.67%), finance Rs 10,639 crore (5.81%) and petroleum products Rs 9,189 crore (5.02%).