Mumbai, February 16, 2026 (Udaipur Kiran) — Mutual funds have turned net sellers in the Indian equity market for the first time in nearly three years, offloading shares worth around Rs 4,100 crore so far in February.
According to market data, mutual funds have been net sellers in six out of the seven trading sessions this month. This marks a break from their consistent buying trend over the past 34 months.
The last time mutual funds recorded net selling was in April 2023, when they sold shares worth over Rs 4,532 crore. Since then, they had remained net buyers. In January alone, mutual funds purchased equities worth Rs 42,355 crore. During 2025, they bought Indian shares worth approximately Rs 4.93 lakh crore.
Portfolio Rebalancing, Not Redemptions
Market experts believe the recent selling is not driven by investor redemptions but by portfolio rebalancing.
Deven Choksey, Managing Director of DR Choksey FinServ, told Moneycontrol that fund houses are adjusting their portfolios. They are shifting investments from underperforming stocks to better-quality shares, particularly in the large-cap segment.
Experts also noted that some funds may be booking profits in stocks accumulated earlier, especially during phases when foreign investors were pulling out of the market. There are no indications so far that investors are withdrawing money through SIPs. The activity appears to be linked to profit booking and allocation changes.
Scale of Selling Not Significant
Feroze Azeez, Deputy CEO of Anand Rathi Wealth, said the scale of selling should not be seen as very large. With the mutual fund industry managing assets worth around Rs 40 lakh crore, a sale of Rs 4,100 crore is relatively small and may reflect actions limited to certain schemes or stocks.
Role of Index Rebalancing
Index rebalancing may also have contributed to the selling. January 31 was the review date for NSE indices, and MSCI also announced changes in its indices in early February. Analysts say the key factor to watch now is whether inflows into equity funds continue. Sustained outflows combined with continued selling would carry different implications.
Market Impact
Akshay Chinchalkar, Head of Market Strategy at The Wealth Company, said factors such as developments in the India-US trade agreement and changes related to agricultural commodities could also influence investment trends.
Amid geopolitical uncertainties, investor interest has also increased in gold ETFs, bond funds and hybrid funds.
The broader market reflects a mixed trend. The Nifty 500 index is about 3.4 per cent below its 52-week high, but nearly 50 per cent of its constituent stocks are trading more than 20 per cent below their 52-week highs. While foreign investor participation has appeared intermittently, sustained inflows may depend on valuations and rupee stability, as the currency continues to hover near its recent lows despite policy measures.
Bhupendra Singh Chundawat is a seasoned technology journalist with over 22 years of experience in the media industry. He specializes in covering the global technology landscape, with a deep focus on manufacturing trends and the geopolitical impact on tech companies. Currently serving as the Editor at Udaipur Kiran, his insights are shaped by decades of hands-on reporting and editorial leadership in the fast-evolving world of technology.