Mutual funds highly exposed to banking

Banking stocks accounted for a chunk of 14.17 per cent of the total equity assets under management (AUM) of the industry at the end of October.

Bank certificates of deposit accounted for Rs 204,162.90 crore, which works out to 35.23 per cent of the total debt AUM of the industry. In absolute terms, MFs hold close to Rs 25,245.38 crore assets in banking stocks. In dollar terms, this works out to roughly US$5.5 billion. The other sector to which MFs have huge exposure is industrial capital goods, which accounts for Rs 13,731.95 crore, or 7.71 per cent, of the industry’s AUM. Besides, banks usually have had a good earnings season in the second quarter.

Credit offtake

Credit off-take is expected to pick up and their CASA (current account, savings account) deposits on incline, which effectively means their borrowing costs will go down, thereby improving their net interest margins, he notes.

Fund houses have invested Rs 204,162.90 crore in bank certificates of deposit. A majority of this, 22.8 per cent, is in bank certificates of deposit  of 90 days to less than a year. MFs’ investments in bank certificates of deposit  went up sharply from 34.01 per cent of the total assets in August to 41.22 per cent in September. However, it came down to 35.23 per cent in October because of redemptions in liquid funds.

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