This month saw mutual funds making significant sales with limited bursts of buying activity. Profit booking could be one reason that may have triggered the selling.

As is evident from the chart below, mutual funds were net sellers in this month except for some sporadic buying between the 15th and 19th of the month.

From a low of around 3,900 points on 20th May, the BSE Sensex has appreciated by over 700 points at current levels. There were opportunities galore to book profits and it is probable that funds made good these opportunities.

As prices of key stocks meander at lower levels and some stocks begin to look attractive, it is possible that the following weeks may see (net) buying by mutual funds. But if the markets continue to decline and there is some redemption pressure, then mutual funds with low cash levels would be forced to offload stock to meet redemptions.

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