The Hindu Business Line : SBI top pick for mutual funds

THE mutual fund industry has invested more than Rs 3,000 crore in one scrip - State Bank of India. Banking sector funds have more than 25 per cent of their entire portfolio invested in this scrip, while diversified equity funds have exposures ranging from 6 per cent to 22 per cent of net asset value riding on SBI.

The largest investor in the scrip as on December 31, 2003 is Franklin India Blue Chip Fund. The growth option of this fund has investment of Rs 128.22 crore. The assets under management (AUM) for the period were at Rs 568.30 crore, taking the exposure to 22.5 per cent.

Morgan Stanley Growth Fund has invested Rs 100.62 crore on the scrip and HDFC Equity Fund has Rs 95.4 crore investment on each of the growth and dividend options.

The value of the share has significantly increased between June and December 2003, but the high level of exposure has been effected due to large volume purchases by funds too. Several diversified equity funds have added up to 40 per cent volume in the scrip during the last six months.

While fund houses do not comment on individual scrips, they are extremely bullish about the banking sector. Mr K.N. Sivasubramanian, Senior Vice-President and Portfolio Manager, Franklin Templeton Investments, said that in the medium to long-term, the sector is expected to do well on the back of a growing economy and changing consumption patterns. "The quarterly results indicate the fundamentally strong PSU banks have been able to make strong inroads into the retail segment and are using technology to streamline operations, cut costs and offer better service," he said.

Mr P.V.K. Mohan, Equity Head, IL&FS MF, reiterates that valuations in the sector are still not stretched; hence banking scrips continue to be very attractive. Banks with a strong rural network are perceived to remain buoyant as agriculture recovery is expected to continue, according to Mr Paras Adenwala, Head Equity, Birla Sunlife MF. This is one of the prime reasons for SBI scrips continuing to be on a "buy" mode for fund managers.

Many fund managers are however, now viewing the industry's exposure to the scrip as a cause of concern.