In March, benchmark indices Sensex and Nifty surged 5.8 percent and 6.3 percent, respectively
Mutual funds have been net sellers in Indian equities over the past six sessions, as they capitalized on the recent market rally to book profits, experts said. .
Between March 20 and 28, mutual funds offloaded equities worth over Rs 16,000 crore, which analysts attribute to profit booking following recent gains. In contrast, they were net buyers earlier in the month, purchasing over Rs22,900 crore worth of equities between March 1 and 19.
In March, benchmark indices Sensex and Nifty surged 5.8 percent and 6.3 percent, respectively, while the broader BSE MidCap and SmallCap indices saw even sharper gains of 7.6 percent and 8.3 percent.
This selling came despite mutual funds’ cash holdings in active equity funds rising to Rs1.46 lakh crore in February 2025, up from Rs1.42 lakh crore in January.
Experts believe this growing cash reserve signals deep-seated concerns over valuations and market direction. Despite a nearly 12 percent correction from recent peaks, fund managers remain cautious, reflecting uncertainties surrounding global economic conditions, Trump’s proposed tariffs, and ongoing geopolitical tensions.
Nikunj Saraf, vice president at Choice Wealth, highlighted that a key factor behind this cautious stance is the sharp selloff in small and mid-cap stocks, where valuations had surged to unsustainable levels. This strategic cash buildup, however, is not indicative of a bearish outlook but rather a prudent risk-management approach. Fund managers are likely waiting for greater market clarity before re-entering with conviction.
The rising cash holdings also reflect a defensive strategy to safeguard investors’ capital from potential market corrections while positioning funds to capitalize on attractive opportunities. According to the research desk at SMC Global Securities, this trend may reverse once the Indian market finds respite from global tariff concerns and foreign institutional investor (FII) selling.
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With India’s economic growth strengthening and inflation easing, upcoming fourth-quarter earnings will be a key driver of market sentiment in the coming months. Experts suggest that the current cash positioning of mutual funds reflects a wait-and-watch approach, ensuring liquidity for timely profit booking while navigating market volatility.
So far 2025, mutual funds have bought over Rs 1.08 lakh crore in Indian equities while in 2024 they bought over Rs 4.3 lakh crore.
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