March records sharpest retail sell-off since Dec 2023; net selling at Rs 10,500 crore

This is the first instance of net selling by retail participants since September 2024 and the most significant since December 2023.

Despite a robust market, March marked the first instance in six months of retail investors turning net sellers of equities, primarily booking profits.

This sell-off, the most significant in 15 months, saw outflows hit Rs 10,500 crore—the first net selling since September 2024 and the steepest since December 2023.

Meanwhile, domestic institutional investors (DIIs) turned aggressive buyers, injecting Rs 28,118 crore into equities while foreign institutional investors (FIIs) continued as net sellers, offloading Rs 8,224 crore.

Experts attribute the retail exodus to multiple factors, with the financial year-end in March being a key driver.

Volatility, FII selling make retail investors cautious

Retail investors, particularly salaried individuals, often liquidate equity holdings—regardless of profit or loss—to fund tax-saving instruments under Section 80 of the Income-Tax Act or to pursue tax-loss harvesting and meet other financial obligations.

Apurva Sheth, head of market perspectives and research at SAMCO Securities, highlighted market volatility as another catalyst. The correction, spanning September 2024 to March 2025, the longest in six months, has unsettled many new investors, especially those heavily invested in small and mid-cap (SMID) stocks, which have faced sharp declines.

Widespread selling by foreign portfolio investors (FPIs) and expert warnings of further SMID corrections likely prompted retail investors to exit, aiming to curb losses, Sheth noted.

Profit-booking over multi-bagger returns

Analysts also point to a shift in investor behaviour amid recent market recovery and policy uncertainty. With gains of 10-15 percent from recent lows, many are opting for short-term profit-booking over chasing multi-bagger returns.

India’s benchmark indices, Sensex and Nifty 50, have risen 6.5 percent and 7 percent, respectively, since the start of March , while BSE Mid and Small Cap indices surged 9.8 percent and 11.1 percent, respectively, outperforming the broader market.

Mayank Mundhra, VP risk & head research at ABANs Financial Services, noted a growing focus on capital preservation amid volatility.

Investors are pivoting to value stocks, fixed-income securities, and gold—the latter gaining favour as a hedge against high interest rates and uncertainty. Despite FIIs resuming cautious buying, market recovery remains tenuous, with retail investors prioritising safety over risk, Mundhra added.

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