Mutual funds have been net sellers in Indian equities over the last six sessions, taking advantage of the recent market surge to lock in profits, according to experts.
Between March 20 and 28, mutual funds sold equities worth over ₹16,000 crore, a move analysts attribute to profit booking following significant market gains. This comes after they were net buyers earlier in the month, purchasing over ₹22,900 crore worth of stocks between March 1 and 19.
In March, benchmark indices Sensex and Nifty rose by 5.8% and 6.3%, respectively, while the BSE MidCap and SmallCap indices saw even higher gains of 7.6% and 8.3%.
Despite this selling trend, mutual funds’ cash holdings in active equity funds increased to ₹1.46 lakh crore in February 2025, up from ₹1.42 lakh crore in January, indicating a more cautious approach.
Experts suggest that this growing cash reserve reflects concerns about high valuations, global economic uncertainties, Trump’s proposed tariffs, and ongoing geopolitical risks. Even after a nearly 12% market correction from recent highs, fund managers remain cautious, opting to wait for more stability before making new investments.
Wealth firms, pointed out that the sharp decline in small and mid-cap stocks, where valuations had become excessively high, is a major reason behind this cautious strategy. However, this increased cash holding does not necessarily indicate a bearish outlook; rather, it is seen as a prudent risk management move.
By holding onto cash, mutual funds are positioning themselves to protect investors from potential market corrections while staying ready to invest in attractive opportunities. Analysts at Various Securities believe that once concerns over global tariffs and foreign institutional investor (FII) selling subside, mutual funds could resume buying.
With India’s economic growth improving and inflation easing, the upcoming Q4 earnings season is expected to play a key role in shaping market sentiment. Experts suggest that fund managers are currently in a wait-and-watch mode, ensuring liquidity for strategic profit booking while navigating market volatility.
So far in 2025, mutual funds have invested over ₹1.08 lakh crore in Indian equities, compared to ₹4.3 lakh crore in 2024.
