Adopting a clear "sell on rise" strategy when the market rallied in April, mutual funds were seen smartly booking profits, pulling an estimated ₹17,000 crore out of just 10 major stocks amid caution over earnings risks, geopolitical uncertainty, and stretched valuations even as several of these stocks staged sharp rallies.
Market data estimates compiled from PRIME Database reveal that at least 109 stocks witnessed mutual funds selling shares worth at least ₹100 crore each last month. However, the exodus was heavily concentrated at the top, with the ten largest exits, headlined by heavily weighted bluechips like HDFC Bank, Wipro and Vedanta, bearing the brunt of the ₹17,000 crore institutional liquidation.
"Equity valuations have normalised — Nifty-50 at 12-month forward PER of 19x — but the earnings risks have risen as the resolution to the West Asia conflict gets delayed further," Tata Mutual Fund said in a note. It cautioned that input costs and supply chain disruptions "could lead to downside both on growth and margins," with crude price pass-throughs adding further pressure. The fund house warned this could drag FY27 earnings growth down from a consensus of 17% to just 12–15%, "delaying the recovery in valuations."
Domestic brokerage Emkay Global has warned of significant downside risk for Indian equities until the resolution of the Gulf conflict and reopening of the Strait of Hormuz. The brokerage, however, added it expects normalcy to return and sees any weakness "as an entry opportunity, with discretionary and industrials as key overweights."
