Posted on May 15, 2025, by Niftynews
As equity markets remain on edge amid mixed earnings and global growth worries, April 2025 saw a major divergence between mutual funds (MFs) and foreign institutional investors (FIIs)—especially in the information technology sector.
While FIIs turned net sellers of Indian IT stocks, citing weak US demand and soft earnings guidance, domestic mutual funds made bold contrarian moves, investing heavily in top-tier tech firms. This sector rotation strategy reflects confidence in long-term value creation despite near-term volatility.
💼 MFs Buy IT, FIIs Sell – What the Data Says
According to Prime Database and NSDL, MFs invested ₹9,599 crore in IT shares during April, while FIIs offloaded over ₹15,000 crore from the sector.
This marked a strategic allocation shift, with MFs clearly seeing current price levels in IT as attractive entry points. Meanwhile, FIIs—spooked by uncertain US demand and margin pressures—continued trimming exposure.
Unlike FII data, mutual fund disclosures offer detailed stock-wise investment data, allowing insights into specific bets made by top fund houses.
🖥️ Top Mutual Fund Picks in IT – April 2025
Among the IT heavyweights, Infosys emerged as the top investment choice, with mutual funds adding shares worth ₹3,011 crore. This was followed by:
- Tata Consultancy Services (TCS) – ₹2,375 crore
- Coforge – ₹1,432 crore
- HCL Technologies, LTIMindtree, Persistent Systems, and Mphasis – Inflows ranging from ₹170 crore to ₹960 crore
These inflows come despite muted Q4 results across the IT pack, as funds appear to be taking a long-term view of digital transformation, cloud adoption, and AI-driven service growth.
🔻 Selective Reductions Still Evident
While the broader IT sector gained MF interest, certain stocks saw outflows:
- Tech Mahindra – ₹270 crore reduction
- Birlasoft and Zaggle Prepaid – Over ₹85 crore each
- Oracle Financial Services, Affle, Neweb Technologies, and Inventurus – Smaller cuts
This highlights that mutual fund managers were discerning in their tech allocations, favoring scale and execution consistency.
💰 Financials Attract Both MFs and FIIs – Sectoral Alignment
In contrast to IT, financial services were universally favored by both MFs and FIIs in April 2025:
- MF investments: ₹4,450 crore
- FII investments: ₹18,409 crore
Top financial stocks that saw significant MF inflows include:
- Kotak Mahindra Bank – ₹1,586 crore
- IDFC First Bank – ₹1,150 crore
- HDFC Bank – ₹1,026 crore
- Others: Axis Bank, Max Financial Services, RBL Bank, HDFC Life, and Shriram Finance
These flows reflect rising optimism about credit growth, strong Q4 numbers from major banks, and the resilience of India’s consumption-led lending cycle.
📉 FMCG and Telecom See MF Exits, FIIs Turn Buyers
On the other hand, mutual funds reduced their exposure in telecom and FMCG sectors, likely due to high valuations and limited short-term upside.
📡 Telecom Outflows – April 2025:
- Bharti Airtel – ₹2,499 crore sold by MFs
- Indus Towers – ₹584 crore
- Bharti Hexacom – ₹173 crore
🛒 FMCG Redemptions:
- ITC – ₹2,779 crore (biggest FMCG outflow)
- HUL – ₹596 crore
- Marico – ₹382 crore
- Other exits: Nestlé India, Tata Consumer, Avanti Feeds, United Spirits
Interestingly, FIIs moved in the opposite direction, investing ₹4,648 crore in telecom and ₹2,917 crore in FMCG—highlighting another area of divergence in positioning.
🔄 Institutional Divergence – A Tactical Opportunity?
April’s data shows clear tactical shifts in portfolio positioning:
| Sector | MF Activity | FII Activity |
|---|---|---|
| IT | ₹9,599 Cr Inflow | ₹15,000 Cr Outflow |
| Financials | ₹4,450 Cr Inflow | ₹18,409 Cr Inflow |
| FMCG | ₹2,211 Cr Outflow | ₹2,917 Cr Inflow |
| Telecom | ₹2,787 Cr Outflow | ₹4,648 Cr Inflow |
This divergence presents unique opportunities for retail investors to align with long-term domestic strategies or tactically follow FII sentiment based on global cues.
📌 Final Thoughts: What Should Investors Do?
The April 2025 investment trends clearly show that mutual funds are positioning for a potential rebound in Indian IT and financial services, backed by long-term structural themes like digital transformation and financial penetration.
At the same time, FII selling in tech and buying in defensives like FMCG and telecom may indicate global macro caution, especially around the US and China growth outlooks.
✅ Key Takeaways:
- Infosys, TCS, Coforge top MF picks despite IT sector weakness
- Financials remain strong across both MF and FII portfolios
- FMCG and telecom see MF exits, but attract FII inflows
- Portfolio realignment signals sector rotation – not panic selling
For investors, aligning with selective mutual fund picks in IT and banking may offer favorable risk-reward, especially as earnings stabilize and macro volatility recedes.
