Mutual funds’ allocation for IT stocks went up to over Rs 41,000 crore at the end of March in view of the weakening rupee, which increases IT exporters’ profitability.
In comparison, equity fund managers’ deployment in software stocks was Rs 36,121 crore in March last year.
Industry experts said that fund managers have been raising their allocation in software stocks due to declining rupee against the US dollar.
About 85 per cent of the IT service companies’ revenues come from exports, especially the US and Europe. A strong dollar boosts their earnings in rupee terms.
The rupee depreciated by 6.03 per cent or 3.77 against the US dollar. It is currently hovering at Rs 66-level.
As per the data available with the Securities and Exchange Board of India, overall deployment of equity funds in software stocks stood at Rs 41,562 crore last month. In January, funds allocation had touched an all time high of over Rs 43,115 crore.
MFs’ exposure to software stocks was at 10.07 per cent of their overall investments last month, about the same level compared with 10.02 per cent in March last year.
IT was the second-most preferred sector with fund mangers after banks. Deployment of equity funds in traditional investment sectors like banking stocks was at Rs 82,196 crore during the period under review.
MFs have an exposure of Rs 31,617 crore in pharma firms, followed by auto (Rs 27,526 crore) and finance (Rs 23,716 crore).
The BSE IT index marginally slipped 0.14 per cent in past fiscal, while the BSE Sensex fell by 9.35 per cent.
MFs are investment vehicles made up of a pool of funds collected from a large number of investors. The money is invested in stocks, bonds and money market instruments, among others.