Question

In December 2025, mutual funds added more than 1 crore shares in several stocks. Some of these stocks delivered positive returns of over 10%, while others declined by 10–20% during the same period despite similar accumulation. The observation that mutual funds continued to increase holdings even when stock prices fell suggests that institutional investors are primarily guided by (

Q: Answer-In December 2025, mutual funds added more than 1 crore shares in several stocks. Some of these stock...

Institutional investors like mutual funds operate on long-term valuation horizons, while short-term prices respond to liquidity conditions and risk sentiment, a key insight from market microstructure and behavioural finance.

A valuation horizons, whereas stock prices in the short run are influenced by (
A , (
B and (
B and (
C factors. Select the correct option for (
C in the above passage.

A (A) long-term; (B) liquidity conditions; (C) risk sentiment

B (A) short-term; (B) dividend expectations; (C) accounting profits

C (A) speculative; (B) arbitrage constraints; (C) insider trading

D (A) passive; (B) index rebalancing; (C) regulatory limits

E (A) random; (B) noise trading; (C) absence of information

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