According to the latest data available with Securities and Exchange Board of India, MF investments in bank stocks reached Rs 56,625 crore as on August 31, accounting for 20.10 percent of their total equity assets under management (AUMs) of Rs 2.81 lakh crore.

Since January, MFs have been raising their exposure to banking shares.

Software was the second most preferred sector with MFs, with an exposure of Rs 29,668 crore, followed by pharma (Rs
19,394 crore), auto (Rs 17,754 crore) and finance (Rs 15,116 crore).

At current levels, the MF industry has the highest exposure to banking sector since August 2009. Data is not available for sector-wise exposure before August 2009, when the equity funds had deployed Rs 22,587 crore (12.73 percent) in banking shares.

The previous high was in July this year when investment in the sector rose to Rs 55,086 crore.

Mutual funds are investment vehicles made up of a pool of funds collected from a large number of investors. MFs invest in stocks, bonds, money market instruments and similar assets.

According to market participants, MFs have been showing interest in banking stocks since the beginning of the year amid rising equity market.

They believe that the ongoing market rally might see mutual fund assets getting diversified.

Meanwhile, the BSE Bankex and the benchmark Sensex witnessed a surge of around three percent in August.

This year has seen a consistent growth in investment in banking stocks by equity fund managers and fund infusion has grown from Rs 30,339 crore in January to Rs 56,625 crore in August.

In percentage term, exposure has risen from 16.6 percent to 20.10 percent during the period.

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