Mutual fund managers had raised their allocation to the banking sector to over Rs 79,000 crore in May in anticipation of a rate cut by the Reserve Bank of India.

In comparison, equity fund managers’ deployment in banking stocks stood at Rs 48,419 crore in May 2014.

According to industry experts, fund managers had raised their allocation last month to bank stocks expecting a rate cut by the Reserve Bank of India (RBI).

The allocation is expected to increase further this month as RBI, in its policy review on June 2, had cut interest rate by 25 basis points to 7.25 per cent, they said.

They also said that fund managers cannot take a bearish call on banking stocks, given the high weightage attached to the index.

As per the data available from the Securities and Exchange Board of India (SEBI), overall deployment of equity funds in bank stocks stood at Rs 79,215 crore in May compared with Rs 74,810 crore in the previous month.

Besides, exposure to banking stocks was at 20.94 per cent of equity AUM in May against 20.7 per cent in the preceding month.

The BSE bankex index inched up 2.3 per cent in May, while the benchmark Sensex witnessed a rise of 3 per cent.

IT was the second-most preferred sector with fund mangers after banks with an exposure of Rs 35,750 crore, followed by pharma (Rs 29,246 crore), auto (Rs 26,215 crore) and finance (Rs 22,925 crore).

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

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