According to the latest data available with market regulator Sebi, Mutual Fund (MF) investments in banking stocks reached Rs 48,419 crore as on May 31, 2014, accounting for 21.59 per cent of their total equity assets under management (AUM) of Rs 2.24 lakh crore.
This was also the fourth consecutive monthly rise in exposure.
After banking, software is the second most preferred sector with MFs having exposure of Rs 22,986 crore, followed by pharmaceuticals (Rs 15,027 crore) and finance (Rs 12,152 crore).
At current levels, the MF industry has the highest exposure to banking sector since at least 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 per cent) in banking shares.
The previous high was in December 2012, when investment in the sector had risen to Rs 43,659 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.
Funds had pumped in Rs 41,104 crore in the banking shares at the end of April this year, while their exposure in the sector was at 20.13 per cent of the equity AUM.
The year 2014 has seen a consistent growth in investment in banking stocks by equity fund mangers and their exposure has risen from 16.6 per cent of total AUM in January to 21.59 per cent in May. In absolute terms, fund infusion has grown from Rs 30,339 crore to Rs 48,419 crore.
According to market participants, MFs have been showing interest in banking stocks since the beginning of the year amidst rising equity market.
Meanwhile, the banking index (bankex) surged by over 15 per cent in May this year, while the 30-scrip BSE sensitive index Sensex rose eight per cent.