Mutual funds sold shares worth over Rs 10,000 crore during the first 11 months of the current financial year on continued redemption pressure.
In contrast, they pumped in a staggering Rs 4.43 lakh crore in the debt market during the period.
Mutual funds offloaded Rs 10,319 crore of shares in the first 11 months of this financial year, according to data with market regulator Securities and Exchange Board of India.
Fund houses have been net sellers in the equity market since September, while they were net buyers of shares to the tune of Rs 1,607 crore in August.
Mutual funds sold equities in nine of the first 11 months and were net buyers in May and August.
The biggest outflow in equities during this period was in October, when fund houses pulled out Rs 4,018 crore.
Besides, the number of folios in equity-oriented schemes plunged by more than 35 lakh due to volatility in the stock markets.
Mutual funds collect money from investors and buy stocks, including IPOs (primary market), and bonds.
Market participants believe that volatile stock markets, the depreciating rupee and an uncertain interest rate regime were the factors that determined investment flow in the mutual fund industry this financial year.
"During the current fiscal, mutual funds have seen a rise in inflows mainly due to gains in debt fund. However, equity funds have been facing redemption pressure for some time," a market participant noted.
"Equity fund investors have been pulling out at higher levels of the market, indicating their lack of confidence in the market's ability to sustain at these levels," he added.
However, analysts are optimistic about equity schemes in 2014 on hopes that a stable government after the general elections will help boost the stock markets.