Indian mutual funds have turned net sellers in February, offloading equities worth nearly ₹4,100 crore, marking their first month of net selling in over three years. This shift comes after a prolonged period of sustained buying, during which mutual funds consistently supported domestic equity markets with strong inflows.

Key Highlights

• Mutual funds sell ₹4,100 crore in February, marking first net equity selling in three years.
• Portfolio rebalancing and profit booking drive February selling amid elevated market valuations.

Market experts attribute this selling largely to strategic portfolio rebalancing and profit booking, rather than investor redemptions or panic-driven exits. According to analysts, fund managers are realigning portfolios in response to elevated market valuations and selective sectoral concerns, while also capitalising on gains accumulated during the recent market rally.

The February selling follows a robust buying phase in January, when mutual funds invested more than ₹42,000 crore in equities, reflecting continued long-term confidence in Indian markets. Throughout 2025, mutual funds had infused nearly ₹4.93 lakh crore, highlighting strong retail participation and consistent SIP inflows.

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Industry specialists believe that the current selling trend is not a sign of weakening market fundamentals, but rather a tactical move aimed at risk management and improving portfolio efficiency. With domestic inflows remaining healthy and retail investor participation strong, the broader market outlook continues to remain positive.

Analysts also note that selective selling helps funds maintain liquidity, rebalance asset allocation, and prepare for potential market volatility, ensuring sustainable long-term returns. Overall, mutual fund participation in equities remains structurally strong, and the February adjustment is being seen as a healthy consolidation phase rather than a bearish signal.