This also marks the third consecutive rise in MF industry's exposure to banking stocks. MFs collect funds from various investors for investing in securities such as stocks, bonds, money market instruments and similar assets.

Their investments in banking stocks stood at Rs 72,835 crore as on December 31, 2014, accounting for 21.88 percent of their total equity assets under management (AUM) of Rs 3.33 lakh crore, according to data available with the Securities and Exchange Board of India (Sebi).

The previous high was November this year when investment in the sector surged to Rs 70,575 crore.

MFs had been raising their exposure to banking shares since January but their investment level in the sector dropped in September. The industry again increased the exposure in October and the momentum continued till December.

The fund infusion has grown from Rs 30,339 crore in January to Rs 72,835 crore in December.

Software was the second most preferred sector with Mfs, last month with an exposure of Rs 33,970 crore, followed by pharma (Rs 23,412 crore), auto (Rs 20,959 crore) and finance (Rs 19,819 crore).

According to market participants, the ongoing market rally might see mutual fund assets getting diversified. The banking index (bankex) grew up by 1.16 percent in December this year, while the 30-scrip BSE Sensex fell four percent.

In percentage terms, exposure has risen from 16.6 per cent to 21.88 percent during the period.

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