April bloom in equities supported by foreign flows, as MFs and retail trim exposure

sensex

The rally in Indian equities that commenced in April following US President Trump’s 90-day tariff pause has been predominantly driven by foreign institutional investors (FIIs), with minimal participation from mutual funds and retail investors, according to exchange data.

Since April 11, when the rally began, retail and mutual fund investors have collectively sold equities worth over Rs 16,000 crore even as FIIs, in sharp contrast, turned net buyers for the period, buying equities worth over Rs 25,897 crore.

On April 9, Trump had announced a temporary tariff suspension, prompting a swift rebound in global equity markets, and Indian markets captured the response when trading resumed on April 11.

As per data from NSE, retail investors have offloaded shares worth over Rs 11,000 crore since April 11 while mutual funds have sold equities worth more than Rs 5,797 crore, as per Sebi data.

“The recent selling by domestic institutional investors (DIIs) is likely due to profit booking amid sharp gains in broader markets, a behavior commonly observed during quick rallies," said Mayank Mundhra, FRN-VP Risk & Head Research at Abans Financial Services.

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Despite the sustained selling by domestic players, the April rally has remained robust, underscoring the inherent strength of the market. Since April 11, both the Sensex and Nifty have surged over 8 percent, while broader market indices have advanced more than 10 percent.

Mutual fund inflows have moderated recently and allocations trimmed down after the significant rally over the past fortnight. However, the buying and selling activity reflects a healthy market. Despite the outflows from DIIs and retail investors, the market's resilience highlights underlying bullish sentiment, said experts.

During this FII-led sell-off triggered by Trump’s initial tariff announcement in early April, DIIs capitalised on lower valuations, accumulating equities worth Rs 27,500 crore.

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities said that mutual funds typically act as a counterbalance to FII flows - buying when FIIs sell and vice versa. "Thus, mutual fund selling during the recent rally is not unusual. Retail investors, who traditionally buy during market dips, may have opted to exit positions that rebounded after experiencing significant mark-to-market losses earlier in the year," explained Sheth.

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