Mutual funds in India sustained their equity buying spree in March 2025, despite slightly lower inflows compared to February. As per the latest Motilal Oswal Fund Folio, the top 20 mutual funds collectively increased their equity exposure by ₹23,500 crore during the month.

This surge in buying was observed across all market capitalisations, with a notable focus on financials, consumer goods, and capital goods sectors. The buying pattern indicates a continued confidence in India’s long-term growth story and sectoral resilience.

Mutual Funds' Market Positioning in March

Mutual funds maintained an overweight position on banks, followed closely by auto, capital goods, utilities, telecom, healthcare, PSU banks, and insurance sectors. The allocations reflected a diversified approach across defensives and cyclicals, indicating an attempt to hedge against macroeconomic uncertainties while also riding growth trends.

In terms of index-wise participation:

• 52% of Nifty 50 stocks saw net mutual fund buying

• 53% of Nifty Midcap 100 companies were net gainers

• 71% of Nifty Smallcap 100 companies witnessed buying action

Top Gainers in the Nifty 50 Universe

Several blue-chip stocks saw significant inflows from mutual funds in March:

• Jio Financial Services witnessed an 18% rise in mutual fund shareholding, with funds buying 6.1 crore shares, raising the stake value to ₹9,150 crore.

• Tata Consumer Products followed, as mutual funds added 1.03 crore shares, a 12.8% increase, pushing the value to ₹9,080 crore.

• Zomato (Eternal) also attracted attention with 16.5 crore shares bought, marking a 10.2% rise in holdings, now valued at ₹36,090 crore.

These investments signal strong institutional faith in companies riding consumption, digital services, and financial infrastructure.

Stocks Witnessing Mutual Fund Selling in Nifty 50

Despite the overall bullish sentiment, profit booking or rebalancing was evident in some heavyweights:

• Hindalco Industries saw the largest reduction in mutual fund holdings at 6.3%.

• Kotak Mahindra Bank came next, with a 5.3% drop in mutual fund stakes.

• JSW Steel followed closely, with a 4.5% reduction in fund-held shares.

This trend could be attributed to valuation concerns, sectoral shifts, or tactical asset allocation.

Strong Activity in Midcap Stocks

Mutual funds also displayed aggressive buying in the Nifty Midcap 100 space. Leading the charge:

• Yes Bank saw a massive 47.9% jump in mutual fund holdings.

• HUDCO registered a 55.6% rise, likely fueled by infrastructure focus.

• IDFC First Bank reported a 22.7% gain in MF holdings.

• Patanjali Foods (21.9% rise) and Hindustan Zinc (18.7%) also gained strong investor interest.

These additions highlight mutual funds’ appetite for value buys and turnaround stories in the midcap space.

Major Sell-Offs in the Midcap Universe

Some stocks, however, saw heavy exits:

• Adani Total Gas witnessed the biggest outflow, with a 52.2% reduction in mutual fund holdings.

• India Renewables saw a 23.2% drop, followed by Ola Electric at 14.7%, and Godrej Properties at 12.5%.

These could be driven by governance concerns, valuation disconnects, or weak operating performance.

High Momentum in Smallcap Stocks

The small-cap segment was particularly active in March, as mutual funds sought to capture undervalued growth opportunities:

• IIFL Finance saw a 36.7% increase in mutual fund holdings, with value jumping 48.3% to ₹460 crore.

• Welspun Living saw a 21.5% surge in shares held, with holding value rising 53.6% to ₹410 crore.

• Castrol India recorded a 13.5% increase, totaling 1.99 crore shares worth ₹400 crore.

• HFCL witnessed a 12.4% increase, with holdings now worth ₹1,250 crore.

• International Gemmological Institute (IGI) saw a 10.2% boost, pushing the value to ₹570 crore.

This pattern suggests increased confidence in niche, well-managed smallcap names that could potentially deliver outsized returns.

Declines in Smallcap Mutual Fund Holdings

Some smallcap names saw a downward trend in mutual fund interest:

• CAMS Services holdings were trimmed by 10%, now totaling ₹172 crore.

• Aadhar Housing Finance saw a 9.3% drop, with holdings now worth ₹66 crore.

• CDSL, PG Electroplast, and Inventurus Knowledge Solutions were other notable exits.

The reduction could be due to liquidity concerns, limited growth visibility, or sector-specific issues.

Conclusion: March Trends Set the Tone for FY25

Despite a marginal dip in monthly inflows, March 2025 marked a robust buying season for mutual funds, especially in financials, consumer, and capital goods sectors across large, mid, and small-cap spaces.

The data reflects continued institutional belief in India’s growth story, especially in companies aligned with domestic consumption, infrastructure, and digital finance. While exits from certain stocks suggest tactical reallocations, the overall sentiment remains constructively bullish.

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