Mutual Funds Turn Net Sellers in February, Offload ₹4,100 Crore Worth Shares Amid Market Volatility

Mutual Funds | In a notable shift, domestic mutual fund companies have turned net sellers in the Indian stock market for the first time in nearly three years. In February alone, mutual funds have sold shares worth approximately ₹4,100 crore.

Out of seven trading sessions so far this month, mutual fund companies remained net sellers on six days. The last significant instance of net selling was in April 2023, when mutual funds offloaded shares worth over ₹4,532 crore. Prior to that, they had remained net buyers for 34 consecutive months.

In contrast, January 2026 saw mutual funds purchase shares worth ₹42,355 crore. In 2025, nearly ₹4.93 lakh crore was mobilised into Indian equities through mutual fund investments.

According to Deven Choksey, Managing Director of DR Choksey FinServ, the recent selling appears to be driven more by portfolio repositioning rather than redemption pressure. He noted that fund houses are exiting underperforming stocks and reallocating assets toward higher-quality names, particularly in the large-cap segment.

Market experts also pointed out that Foreign Institutional Investors (FIIs) have been heavy sellers in recent months. Mutual funds are now reviewing and trimming positions in stocks they had accumulated earlier.

Analysts emphasised that there are currently no signs of redemption pressure. Systematic Investment Plan (SIP) inflows continue steadily, suggesting that the selling activity is primarily linked to portfolio balancing and profit booking.

Feroze Azeez, Deputy CEO of Anand Rathi Wealth, said the scale of selling should not be viewed as alarming. In an industry managing assets worth nearly ₹40 lakh crore, a ₹4,100 crore sell-off remains relatively small.

Experts also suggested that the selling may be linked to index rebalancing, as January 31 marks the review date for NSE indices, while MSCI announced restructuring at the beginning of February. Observers believe that the key factor to watch is whether equity fund inflows remain stable, as sustained selling combined with declining investments could have broader implications.

Meanwhile, Akshay Chinchalkar, Managing Partner and Head of Market Strategy at The Wealth Company, stated that geopolitical uncertainty and expectations of future policy easing are prompting investors to shift towards gold and silver ETFs, bond funds and hybrid funds.

Market participants will closely monitor equity fund flows in the coming weeks to assess whether the recent selling trend is temporary or indicative of a broader shift in investment strategy.