Mutual funds have been net sellers in Indian equities over the past six sessions, offloading stocks worth over ₹16,000 crore between March 20 and 28. Experts believe this selling is due to profit booking, as fund houses take advantage of the recent market rally. In contrast, mutual funds were net buyers earlier in March, purchasing over ₹22,900 crore worth of equities between March 1 and 19.
Indian stock markets have seen strong gains in March, with Sensex rising 5.8 percent and Nifty climbing 6.3 percent. The broader indices also witnessed a surge, with BSE MidCap and SmallCap indices jumping 7.6 percent and 8.3 percent, respectively. Despite the rally, mutual funds have increased their cash holdings, with active equity funds holding ₹1.46 lakh crore in February 2025, up from ₹1.42 lakh crore in January. Analysts believe this reflects concerns over high valuations and the uncertain market direction, especially after a nearly 12 percent correction from recent peaks.
The fund managers are also seen taking a defensive stance, keeping higher cash levels to protect investors’ funds until some better opportunities arise in markets. Some of these major concerns spooking markets are all about global economic conditions, proposed metal tariffs by Trump on auto imports, geo-political tensions, and foreign institutional investors (FII) pressure of selling. SMC Global Securities’ analysts perceive the pattern of selling to also turn when uncertainties elsewhere in the world ease and FIIs again turn in to Indian markets.
India’s economic growth continues to stay robust, and with inflation softening, fourth-quarter revenues will continue to influence sentiment in the markets. Mutual funds are probably following a wait-and-watch policy, keeping liquidity in store to invest in the future while dealing with volatility in markets. To date in 2025, mutual funds have so far pumped in ₹1.08 lakh crore into Indian equities, after a collective investment of ₹4.3 lakh crore in 2024.
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Source: Moneycontrol.
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