Exit Rush: Mutual funds drive block deal momentum as promoters capitalise on market highs

Domestic mutual funds have led the surge in block deal activity between May to June so far, as promoters and private equity (PE) players capitalised on elevated valuations to offload stakes ahead of Q1FY26 blackout period, starting July 1.

Data from Prime Database shows that mutual funds (MFs) emerged as dominant buyers between May 1 and June 19, helped by strong inflows, to absorb large secondary transactions across financials and consumer sector as well as midcap names.

Block deals accounted for nearly 30 percent of the total deal volumes but contributed around 60 percent of the overall transaction value during this period, underscoring their role as the preferred exit route for large shareholders. The uptick in deal-making spanned across a range of sectors, particularly technology, chemicals and logistics, and reflected strategic exits timed to take advantage of buoyant valuations.

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Significant exits in May and June included those by Vedanta, Quality Investment Holdings PCC, and Threpsi Care LLP. While some sellers are taking profits off the table, others are restructuring portfolios or exiting due to fund life cycles and post-IPO lock-in expiries. “The market’s depth allows both large and small exits without serious price disruption,” said one trader at a leading domestic brokerage.

Mutual funds emerged as buyers in several key transactions. Of the Rs 6,702 crore total block deal value captured in a sample of 15 deals across five companies, MFs invested Rs 2,163 crore (around 32 percent) through three transactions involving PNB Housing Finance and Zydus Wellness, acquiring approximately 17.5 million shares (nearly 25 percent of the total shares traded in these deals).

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In PNB Housing, PE investor Quality Investment Holdings PCC sold 27.12 million shares worth Rs 2,713 crore across two tranches, priced at Rs 1,000 apiece. MFs including Nippon India (Rs 300 crore), Kotak Mahindra (Rs 340 crore), and Franklin Templeton (Rs 125 crore) absorbed close to 60 percent of the total deal value. Meanwhile, PPFAS Mutual Fund took the entire Rs 879 crore Zydus Wellness deal, acquiring 4.63 million shares from Threpsi Care LLP.

By comparison, foreign institutional investors (FIIs) deployed Rs 376 crore (approximately 5.6 percent), insurance firms invested Rs 320 crore (approximately 4.8 percent), and alternative investment funds (AIFs) picked up Rs 70 crore (approximately 1 percent). This reflects the outsize role MFs are playing, backed by a record Rs 25,999 crore in May 2025 SIP inflows (as per AMFI data), in absorbing promoter and PE exits, especially in mid-cap financials and consumer-focused names, often at negotiated block prices.

Read More: Mutual funds go bargain hunting in May, buy Rs 29,000 crore of shares from exiting promoters, FIIs

“Mutual funds are targeting quality stocks at attractive valuations through negotiated blocks, helping maintain portfolio quality while ensuring market stability,” said a senior merchant banker involved in multiple deals.

Market experts say the backdrop of sustained liquidity, especially domestic, is keeping the deal activity buoyant. Independent market expert Kranti Bathini said, “We’ve seen nearly $30 billion in block deals in the first half of 2025, fuelled by the high MF liquidity even amid high valuations. SIPs continue to offer firepower to fund houses looking to deploy long-term capital.”

The looming Sebi-mandated blackout period – from July 1 until 48 hours after Q1FY26 results are disclosed – restricts trading by promoters during the earnings season. This regulatory constraint has accelerated deal-making activity, especially among promoters and PE firms keen to monetise holdings while market sentiment remains strong. “With Nifty 50 trading at approximately 22 times forward earnings and mid and smallcaps often at 30 times or more, many long-term investors are locking in gains,” said another investment banker. “For PE funds, several exits also align with IPO lock-ins expiring or fund tenures concluding,” she added.

According to a Prime Database’ analysis of H1 2025, SBI MF alone had invested Rs 12,303 crore across the top 20 block deals in 2025 so far, followed by ICICI MF (Rs 4,232 crore) and Kotak MF (Rs 2,578 crore). Some of the year’s largest deals include Vishal Mega Mart’s Rs 10,220 crore stake sale (19 percent stake) to a clutch of buyers including SBI, HDFC, and Kotak MF, and British American Tobacco’s Rs 11,500 crore divestment in ITC, which saw Quant and Mirae among key investors.

While financials and technology dominated high-value transactions, broader activity spans mid and smallcap names in chemicals (such as Mahickra Chemicals), logistics (Oneclick Logistics), and industrials. Block and bulk trades were also seen in newer listings including Netweb Technologies India and GRSM Minerals & Metals LLP.

The Reserve Bank of India’s 50 bps rate cut in June added to the tailwind, with market stability and a credit growth expectation of 13-13.5 percent in FY26 further supporting investor confidence. “High valuations don’t yet seem to be deterring institutional appetite,” said a senior banker. “But any sharp correction could impact retail portfolios via mutual funds, given their scale in secondary deal absorption,” he added.

Merchant bankers anticipate continued momentum in Q2FY26, led by domestic institutional investor (DII) liquidity and selective FII participation. “India’s market structure now allows large, clean exits without spooking prices. MFs and AIFs are acting as stabilisers in that process,” said one merchant banker.

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