IIFL Finance and GMDC Among Top 5 Smallcap Stocks That Saw Highest Mutual Fund Selling in August

Mutual Funds Cut Holdings in Five Smallcap Stocks in August

Mutual fund portfolios saw significant changes across the small-cap segment in August 2026, with some stocks witnessing sharp reductions in institutional holdings.

According to Motilal Oswal Financial Services' Fund Folio: Indian Mutual Fund Tracker – September 2026, the five small-cap stocks that recorded the largest month-on-month declines in mutual fund-held shares were Himadri Speciality Chemical, GMDC, IIFL Finance, MRPL and Sarda Energy.

The data compares mutual fund holdings in August 2026 with July 2026 and covers stocks in the Nifty Smallcap 100 universe. 

Smallcap StockMutual Fund Holding Change in AugustShares Held in AugustHimadri Speciality Chemical-56.8%0.26 croreGMDC-46.7%0.07 croreIIFL Finance-21.7%0.68 croreMRPL-13.2%0.84 croreSarda Energy-11.8%0.14 crore

The changes represent the month-on-month change in shares held by mutual funds, rather than a direct measure of a stock's future prospects. 

Himadri Speciality Chemical Sees Biggest Decline

Himadri Speciality Chemical recorded the largest reduction in mutual fund-held shares among the five stocks.

Mutual fund holdings declined 56.8% month-on-month, with funds holding approximately 0.26 crore shares in August.

The Economic Times report, citing Motilal Oswal Financial Services, identified Himadri Speciality as the small-cap stock with the highest net mutual fund selling during August. 

The sharp reduction in institutional holdings indicates substantial portfolio-level selling during the month. However, the movement in mutual fund ownership should not be interpreted on its own as a buy or sell signal for individual investors.

GMDC Mutual Fund Holdings Fall 46.7%

Gujarat Mineral Development Corporation (GMDC) was the second-largest decliner among the small-cap stocks tracked.

Mutual fund-held shares in GMDC fell 46.7% month-on-month, with funds holding around 0.07 crore shares at the end of August.

The Economic Times report also noted that GMDC accounted for approximately 0.8% of small-cap value in the data set. 

The magnitude of the decline in mutual fund holdings makes GMDC one of the most notable small-cap portfolio reductions recorded in August.

IIFL Finance Sees 21.7% Reduction in Mutual Fund Holdings

IIFL Finance ranked third among the five small-cap stocks with the largest decline in mutual fund-held shares.

Mutual fund holdings dropped 21.7% month-on-month, with approximately 0.68 crore shares held by mutual funds in August. 

The stock's mutual fund ownership movement also shows that selling was not necessarily uniform across all schemes.

Data from Trendlyne, for example, shows that 41 mutual funds bought shares of IIFL Finance while seven sold shares during August, resulting in a net increase in the number of shares held according to its database. Franklin India Opportunities Fund was listed as the largest buyer, while Franklin India Small Cap Fund was the largest seller. 

This highlights an important distinction: aggregate changes in mutual fund holdings can coexist with buying by some schemes and selling by others.

MRPL Mutual Fund Holdings Decline 13.2%

Mangalore Refinery and Petrochemicals (MRPL) was the fourth stock in the list.

Mutual fund-held shares declined 13.2% month-on-month in August.

Funds held approximately 0.84 crore MRPL shares at the end of August, according to the Motilal Oswal data reported by Mint. 

The reduction was smaller than the declines recorded in Himadri Speciality Chemical, GMDC and IIFL Finance, but still placed MRPL among the five small-cap stocks with the largest reductions in mutual fund ownership.

Sarda Energy Rounds Out the Top Five

Sarda Energy & Minerals completed the list, with mutual fund-held shares declining 11.8% month-on-month.

Mutual funds held approximately 0.14 crore shares in August.

The reduction was the smallest among the five stocks highlighted in the report, but it was still significant enough to place Sarda Energy among the small-cap stocks with the largest mutual fund selling during the month. 

Smallcaps Also Saw Broad-Based Mutual Fund Buying

The selling in these five stocks should be viewed in the context of broader mutual fund activity across the small-cap segment.

According to the Motilal Oswal report, mutual funds were net buyers in 64% of Nifty Smallcap 100 stocks, or 64 stocks, during August.

This means that the selling was concentrated in certain stocks rather than representing a broad reduction in mutual fund exposure to the entire small-cap universe. 

In fact, several small-cap stocks recorded substantial increases in mutual fund holdings during the same period.

Which Smallcap Stocks Saw the Most Mutual Fund Buying?

The same Motilal Oswal data identified Tenneco Clean Air India as the small-cap stock with the biggest increase in mutual fund-held shares.

Its mutual fund holdings rose 129.5% month-on-month, followed by:

Smallcap StockChange in Mutual Fund HoldingsTenneco Clean Air India+129.5%KFin Technologies+41.0%Urban Company+29.2%Hindustan Copper+28.7%Aster DM Quality+27.7%

The contrast between these stocks and the five names that saw selling demonstrates the extent of portfolio reshuffling within the small-cap segment during August. 

Selling Does Not Mean All Mutual Funds Exited

The term "mutual fund selling" can sometimes create the impression that every fund holding a stock reduced its position.

That is not necessarily the case.

Aggregate mutual fund ownership represents the combined holdings of multiple schemes. Some funds may increase their positions while others reduce them.

IIFL Finance provides an example of this difference. Trendlyne's August data showed 41 mutual funds buying and seven selling, even though the overall shareholding change reported in the broader Motilal Oswal analysis showed a decline in mutual fund-held shares. 

Therefore, investors should distinguish between:

• Aggregate change in mutual fund ownership

• Number of funds buying or selling

• Individual fund-level transactions

• The overall number of shares held by mutual funds

These measures can tell different stories.

Mutual Fund Portfolio Changes Are Not Investment Recommendations

A reduction in mutual fund ownership does not automatically indicate that a stock is fundamentally weak or that its price must decline.

Fund managers may sell stocks for several reasons, including:

• Portfolio rebalancing

• Profit booking

• Changes in valuation

• Changes in the fund's investment strategy

• Risk management

• Redemption requirements

• Rotation into other opportunities

• Changes in the outlook for a particular business or sector

Similarly, a rise in mutual fund holdings does not guarantee future gains.

Investors should therefore use mutual fund portfolio changes as one data point rather than treating them as a standalone investment signal.

Smallcap Stocks Can Experience Higher Volatility

Small-cap companies generally have smaller market capitalisations than large-cap companies and can experience substantial price movements.

The August data illustrates this volatility in mutual fund ownership. Himadri Speciality Chemical and GMDC saw mutual fund-held shares fall by more than 45% in a single month.

Such movements can reflect portfolio restructuring, changes in institutional participation or changes in market conditions.

Investors analysing small-cap stocks should therefore examine company fundamentals, earnings, valuations, debt levels, business prospects and liquidity alongside institutional ownership trends.

How to Read Mutual Fund Holding Data

Investors looking at mutual fund shareholding data should focus on several indicators rather than one monthly figure.

1. Change in shares held

This shows whether the total number of shares held by mutual funds has increased or decreased.

2. Number of funds buying and selling

This helps reveal whether the change was broad-based or concentrated among a small number of schemes.

3. Holding as a percentage of the company

A stock may show a large percentage change in holdings while the absolute institutional ownership remains relatively small.

4. Historical trend

One month's selling may have limited significance if mutual fund ownership has been increasing consistently over a longer period.

5. Portfolio concentration

Investors should consider whether a particular fund's decision reflects a broader institutional trend or an individual portfolio-management decision.

August Data Shows Rotation Within Smallcaps

The broader August data points toward rotation rather than a blanket exit from small-cap stocks.

Mutual funds were net buyers in 64% of Nifty Smallcap 100 stocks, even while holdings in Himadri Speciality Chemical, GMDC, IIFL Finance, MRPL and Sarda Energy declined.

At the same time, Tenneco Clean Air India and KFin Technologies saw particularly large increases in mutual fund-held shares. 

This indicates that fund managers were adjusting their exposure within the small-cap universe rather than simply reducing small-cap investments across the board.

What Investors Should Watch Next

The next few months of portfolio disclosures will show whether the August changes represented temporary rebalancing or a more sustained shift in institutional ownership.

Investors may want to monitor:

• September mutual fund shareholding data

• Quarterly earnings

• Changes in institutional ownership

• Valuation multiples

• Revenue and profit growth

• Debt and cash-flow trends

• Sector-specific developments

• Trading liquidity and volatility

The direction of mutual fund ownership over several quarters can provide more context than a single month's movement.

Bottom Line

The August 2026 mutual fund portfolio data showed significant selling in a handful of small-cap stocks.

Himadri Speciality Chemical recorded the sharpest decline in mutual fund-held shares at 56.8%, followed by GMDC at 46.7%, IIFL Finance at 21.7%, MRPL at 13.2% and Sarda Energy at 11.8%. 

However, the data does not point to a broad-based exit from smallcaps. Mutual funds were net buyers in 64% of Nifty Smallcap 100 stocks during August, with several stocks recording substantial increases in institutional holdings.

For investors, the key takeaway is that mutual fund buying and selling data should be interpreted in context. Portfolio changes can reflect rebalancing, valuation decisions, risk management or fund-specific strategies and should not be treated as standalone investment recommendations.