Domestic mutual funds are betting big on information technology stocks,as the equity scheme exposure to the defensive sector has jumped to a record high of about Rs 71,000 crore in April, according to the data on the Securities and Exchange Board of India.
According to mutual fund managers, fund houses are augmenting stake in the IT sector amid depreciating rupee and market volatility.
"Rupee is falling against the dollar which is good for IT companies and that is why we have been investing in software companies," said a fund manager from a private fund house.
Since the start of 2018, Indian rupee has depreciated by 5.82 percent against the dollar and has been hovering around 68 a dollar.
From January this year, mutual fund managers have increased weightage to the sector, which earns a big part of their revenues in US dollars.So, each dollar earned abroad will get IT companies more rupees.
According to the SEBI data, fund houses allocated Rs 70,773 crore in April, accounting for 7.37 percent of their total equity assets under management of Rs 9.6 lakh crore.
In comparison, the exposure was at Rs 64,265 crore in March and Rs 42,023 crore in April 2017.
Going by the investments in April 2018, the mutual fund industry has the highest exposure to software sector since August 2009 when they had invested 6.71 percent of AUM in software companies.
Since start of calendar year 2018, fund house have been consistent investors of software stocks as the allocation has increased from Rs 29,937 crore in January to Rs 70,773 crore in April.
So far this year, BSE IT index has risen over 18 percent compared to BSE's Sensex that went up by 2.5 percent in the same period.
Last month, mutual funds also had exposure of Rs 96,727 crore in the financial services sector , followed by consumer durables at Rs 64,476 crore, automobiles at Rs 55,370 crore, construction project at Rs 43,224 crore and petroleum products at Rs 37,143 crore.