Indian mutual funds have reduced their shareholding in Paytm’s parent company, One97 Communications, for the first time since the company’s stock market debut in 2021. The move comes amid continued selling by retail investors, even as the stock has recovered sharply from its record lows.

According to shareholding data for the October–December quarter, domestic mutual funds lowered their combined stake in Paytm to 14.96 percent. This marks a decline from 16.25 percent at the end of the September quarter, ending a long phase of steady accumulation by fund houses since the IPO.

Retail investors, meanwhile, continued to pare their exposure for the seventh straight quarter. Their holdings have now fallen to the lowest level seen since September 2023, highlighting persistent caution among small shareholders.

First Post-IPO Cut

The reduction by mutual funds is significant as it is the first instance of selling by institutional investors since Paytm listed on the exchanges in November 2021. Until the September quarter, fund houses had consistently raised their stakes despite volatility in the stock.

The latest data suggest a shift toward a more cautious stance, possibly reflecting concerns around valuation, growth visibility, and the pace of improvement in the company’s core business. While no single factor has been cited, the timing coincides with broader reassessments of fintech stocks.

Market participants note that mutual fund actions are often driven by portfolio rebalancing and risk management rather than short-term price movements, making the development closely watched.

Several large fund houses trimmed their exposure during the quarter. Motilal Oswal Midcap Fund reduced its stake to 4.96 percent from 5.57 percent. Nippon India Growth Midcap Fund cut its holding to 1.64 percent from 2.11 percent, while Mirae Asset Largecap Fund lowered its stake marginally to 1.56 percent.

Bandhan Mutual Fund, which held a little over one percent earlier, no longer appears in the December quarter disclosures. This indicates either a full exit or a reduction below the reporting threshold.

These changes collectively contributed to the overall decline in mutual fund ownership of the stock.

Retail Exit Continues

Retail shareholders, defined as those holding shares worth up to ₹2 lakh, have continued selling Paytm stock despite a strong rebound in recent months. The selling trend has persisted since mid-2024, even as prices recovered from all-time lows of around ₹300.

This behaviour suggests that many small investors may be using price rallies as exit opportunities, possibly due to long-standing losses since the IPO or uncertainty about long-term prospects.

The continued reduction in retail holding contrasts with the stock’s sharp upward movement, underlining a gap between price recovery and investor confidence.

Paytm shares have rebounded more than threefold from their lowest levels, supported by easing regulatory concerns and progress on key approvals. The recovery was aided by clarity around regulatory action linked to the Reserve Bank of India and the receipt of a payment aggregator licence by a group entity.

Expectations around improving profitability also supported sentiment, pushing the stock to a 52-week high of ₹1,381. However, despite this rally, the shares still trade about 40 percent below the IPO price of ₹2,150.

Investors are now closely tracking upcoming quarterly results for further signals on revenue growth, cost control, and the path to sustained profitability, which could influence future institutional and retail interest in the stock.