Domestic mutual funds continuing to favour sectors such as pharmaceuticals, e-commerce, consumer durables and capital goods, while remaining underweight on oil & gas, private banks and information technology services. That’s according to JM Financial‘s latest monthly flow tracker. .
The report stated that the decline in overall equity inflows was accompanied by lower thematic fund participation and weaker arbitrage fund inflows, although SIP registrations continued to outpace recent trends.
Pharma, e-commerce and capital goods remain the biggest sector bets
JM Financial’s analysis of mutual fund positioning showed no change in the top overweight sectors compared with April.
Pharmaceuticals and healthcare remained the most overweight sector relative to the BSE 200 benchmark, followed by e-commerce, consumer durables, capital goods and agrochemicals and petrochemicals. Domestic mutual funds also maintained exposure to segments such as media, sugar and diversified businesses that do not carry any weight in the BSE 200 index.
According to the report, pharmaceuticals and healthcare carried an overweight position of 1.3 percentage points relative to the benchmark, while e-commerce was overweight by 1.1 percentage points. Consumer durables, capital goods and agrochemicals and petrochemicals were each overweight by 0.6 percentage points.
Oil & gas, private banks and IT remain under-owned
The top underweight sectors were also unchanged from April.
Oil & gas remained the most underweight sector, with mutual funds holding positions 3.2 percentage points below benchmark weights. Private banks were underweight by 2.8 percentage points, followed by consumer stocks at 1.8 percentage points, information technology services at 1.6 percentage points and metals and mining at 1.3 percentage points.
Utilities, telecom, PSU banks, automobiles and engineering-construction companies also remained underweight relative to benchmark allocations.
Banks, oil & gas and e-commerce attract the highest buying
Among sectors witnessing the strongest buying activity during May, private banks topped the list with net purchases worth Rs 20,590 crore.
The sector’s biggest additions included ICICI Bank, HDFC Bank, Axis Bank, Yes Bank and Bandhan Bank. Oil & gas stocks attracted purchases worth Rs 9,383 crore, led by Reliance Industries, Gujarat Energy, HPCL, Indraprastha Gas and ONGC.
E-commerce stocks saw net buying of Rs 8,945 crore, driven by investments in Billionbrains Garage Ventures, Eternal, Pine Labs, Paytm and PB Fintech. Consumer stocks attracted Rs 7,852 crore of inflows, while utilities drew Rs 6,944 crore.
At the individual stock level, ICICI Bank emerged as the biggest mutual fund purchase during May with net buying worth Rs 9,849 crore. HDFC Bank followed with Rs 7,513 crore, while Reliance Industries attracted Rs 7,014 crore. Gujarat Energy, Lenskart, TVS Motor, HDFC Life, JSW Energy and Eternal also featured among the most purchased stocks.
Metals and IT witness the heaviest selling
Metals and mining recorded the largest sectoral selling during May, with net outflows of Rs 2,654 crore.
The selling was led by Vedanta, NALCO, SAIL, Hindalco and Tata Steel. Information technology services followed with net selling of Rs 2,620 crore, driven by exits from Infosys, Wipro, Oracle Software, E2E Networks and Coforge.
Engineering and construction stocks witnessed net selling of Rs 1,407 crore, while paints, cable and telecom stocks also saw outflows.
Infosys was the most sold stock across mutual fund portfolios during May, witnessing net selling worth Rs 2,593 crore. Multi Commodity Exchange of India , Vedanta, Wipro, GE Vernova T&D India, Lupin Ltd. and Larsen & Toubro also featured among the biggest reductions.
Mutual fund cash levels decline
Cash holdings across domestic mutual funds moderated during the month.
JM Financial said mutual fund cash balances stood at Rs 1.89 lakh crore at the end of May, equivalent to 4.1% of total equity assets under management. This compares with Rs 1.99 lakh crore, or 4.3% of equity AUM, at the end of April.
The decline suggests fund managers deployed a portion of their available cash despite weaker overall inflows during the month.
Conclusion
JM Financial’s May 2026 mutual fund tracker highlighted that
domestic funds maintained their preference for pharmaceuticals, e-commerce, consumer durables and capital goods while staying cautious on oil & gas, private banks and information technology services.
Buying activity remained concentrated in large private banks, energy and e-commerce names, while metals and technology stocks faced the largest selling pressure during the month.
Disclaimer: The sector overweight metrics, fund inflow data, and specific stock buying or selling patterns discussed in this report are sourced from JM Financial’s monthly tracker and are intended for general market analysis only. This coverage does not constitute an offer, solicitation, or recommendation to invest in any specific mutual fund schemes, sectoral themes, or individual equities mentioned. Because mutual fund investments are subject to market risks and systemic volatility, readers are strongly advised to review the specific scheme information documents and consult a SEBI-registered investment advisor before making personal capital allocations.
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