Sharp Pullback from Blue-Chip Holdings as MF Strategy Shifts
In a marked departure from their recent aggressive buying trend, Indian mutual funds reduced their exposure in 39 out of 50 Nifty stocks during April, with ICICI Bank, HDFC Bank, and Bharti Airtel bearing the brunt of the outflows. According to data compiled by Moneycontrol, this recalibration is seen as a strategic round of profit booking or portfolio realignment in anticipation of earnings season, particularly after a period of heavy institutional accumulation amid geopolitical volatility.
ICICI Bank saw the steepest selling, with MFs offloading shares worth ₹6,400 crore, followed by HDFC Bank (₹5,285 crore) and Bharti Airtel (₹4,819 crore). The trend also impacted other heavyweights such as ITC (₹4,466 crore), Axis Bank (₹3,081 crore), and Bajaj Finance (₹2,600 crore), indicating a tactical unwinding in sectors like BFSI and telecom that had seen strong recent rallies.
Highlights:
Mutual funds cut holdings in 39 of 50 Nifty stocks.
Top MF outflows: ICICI Bank (₹6,400 crore), HDFC Bank (₹5,285 crore), Bharti Airtel (₹4,819 crore).
Key sectors witnessing exits: financials, telecom, and FMCG.
Selective Buying in IT, Steel, Pharma as Focus Narrows to Earnings Visibility
Despite the broader selling trend, mutual funds increased stakes in select large-cap counters, notably in the IT and industrial sectors. Tata Consultancy Services (TCS) topped the buying chart with ₹1,647 crore in net inflows, reflecting fund managers’ confidence in its earnings stability and margin outlook amid the global tech rebound. Other gainers included Tata Steel (₹1,285 crore) and Infosys (₹1,210 crore), suggesting that IT and core sectors are attracting targeted allocations.
Additional buying interest was seen in Reliance Industries (₹957 crore), Dr Reddy’s Laboratories (₹690 crore), HDFC Life Insurance (₹515 crore), JSW Steel (₹403 crore), and Bajaj Auto (₹267 crore), signaling that mutual funds remain constructive on select defensives and high-growth plays despite reducing index-wide exposure.
Highlights:
TCS leads mutual fund buying with ₹1,647 crore inflows.
Infosys, Tata Steel, Reliance among stocks seeing increased MF holdings.
Focus shifts to stocks with strong earnings visibility amid macro uncertainties.
Tactical Exit by MFs Meets FII Buying Frenzy, Markets Rally Regardless
While domestic mutual funds turned net sellers in the second half of April, offloading equities worth ₹2,182 crore, their exit was counterbalanced by resurgent foreign institutional investor (FII) inflows. FIIs, who had been consistent sellers since September, staged a strong comeback, pouring ₹31,525 crore into Indian equities in the second half of April alone, after selling ₹20,793 crore in the first half. This stark reversal helped propel benchmark indices sharply higher.
The Sensex gained 3.7%, while the Nifty 50 rose 3.5% for the month. Mid- and small-cap segments also saw robust performance, with the BSE MidCap index up 3.3% and the SmallCap index climbing 1.6%, suggesting broad-based strength despite MF outflows.
Highlights:
Mutual funds net sellers in second half of April: ₹2,182 crore outflow.
FIIs became aggressive net buyers: ₹31,525 crore inflow in late April.
Market rally supported by FII return, with Nifty up 3.5%, Sensex up 3.7%.
Realignment Ahead of Earnings, Tactical Rotation in Play
Rajesh Palviya of Axis Securities noted that mutual funds appear to be engaged in profit booking and tactical rebalancing, particularly after buying into recent market corrections triggered by geopolitical risk. He emphasized that the selling is not a sign of structural withdrawal, but a positioning exercise to take advantage of recent rallies in certain sectors while reallocating capital into stocks with better near-term earnings potential.
Analysts also highlighted the ongoing rotation of global capital out of Chinese equities and into Indian markets, further supporting the resilience of Indian benchmarks despite local institutional profit booking. As the FY25 earnings season unfolds, mutual funds are expected to continue this stock-specific approach, especially in sectors like technology, industrials, and pharma, where visibility remains robust.
Highlights:
MF activity likely tactical, not indicative of long-term bearishness.
Strategy focused on rotating capital to earnings-resilient sectors.
Global shift from China to India continues to support FII flows.
