Indian mutual funds are likely to continue swapping the central government debt on their books with high-yielding state government bonds after active purchases over the last few days, four fund managers said on Thursday.

"Mutual funds likely sold 10-year government bond and got into state debt, as yield spread of around 40 basis points is still decent," said Avnish Jain, head of fixed income at Canara Robeco Asset Management.

Jain expects mutual funds to continue with this switch in the next quarter amid expectations that state bond yields will slip when compared with central bonds.

Mutual funds have net sold central government bonds worth 143 billion rupees ($1.72 billion) over the last seven sessions, including a record single-session sale of more than 60 billion rupees on Monday, data showed.