Why DIIs net sold index futures for last 8 days? Here's what F&O data says

The NSE F&O data shows that domestic institutional investors offloaded over 36,000 contracts of index futures in the last 8 days, while the Nifty 50 index rose nearly 4 per cent.

The May derivatives, also commonly known as the futures & options, series is off to a rather quiet start, with the Nifty May futures up merely 0.2 per cent in the first three trading sessions thus far.  Among other listed index futures on the NSE - Bank Nifty May has advanced 0.3 per cent. Whereas, the Nifty Next 50, MidCap Nifty and the Nifty Financial Services (FinNifty) futures have declined 1.3 per cent, 0.6 per cent and 0.5 per cent in the last three trading sessions.  The NSE F&O data shows that the open interest in Bank Nifty May has declined by 9.1 per cent in the same period, mainly on account of profit-taking after the banking index rose to record high levels. The Nifty futures OI has risen by 13.6 per cent, Nifty Next 50 by 21.2 per cent, MidCap Nifty by 8.3 per cent and FinNifty by 2.8 per cent.  Follow Stock market LIVE updates 

Trading activity by key market participants

  Data from the NSE derivatives segment shows that foreign institutional investors (FIIs) have net bought 6,943 contracts of index futures in the first three trading sessions of May series thus far. At the same time, proprietary traders have net purchased 19,347 contracts. Retail investors, however, have net sold 2,832 contracts, and while domestic institutional investors (DIIs) have net sold 23,458 contracts of index futures.    Interestingly, DIIs are now net sellers in the index futures for the last eight straight trading sessions. Data shows that DIIs have offloaded a total of 36,002 contracts of index futures in the last eight days. 

Here's what DIIs, other market participants trading activity indicates

  DIIs, in particular, who have been net sellers lately, were seen offloading their existing long positions. Data shows that eight days ago - as of April 16 DIIs long-short ratio in index futures stood at 3.9 - implying nearly 4 long positions for every short trade. This ratio has now dropped to 2 - i.e. 2 long positions for every short trade. In the same period, the NSE Nifty 50 index has surged 3.8 per cent.  The above data in conjunction with NSE Nifty movement suggests that DIIs may have booked profits at higher levels. In general, DIIs use derivatives products such as index futures to hedge their equity investments from losses due to market downturns.  On the other hand data shows that FIIs pruned their short holdings, as the long-short ratio increased from 0.4 to 0.8 at present. Meanwhile, retail and proprietary traders have shifted from net long to marginally short in the last eight days. Retail investors long-short ratio now stands at 0.8, while proprietary traders at 0.9.   

Cues from stock futures

  PNB Housing Finance has seen long build-up in the last three days. The stock has gained 2 per cent on the back of over 37 per cent surge in open interest. Similarly, buying interest was visible in Max Financial Services, KPIT Technologies and Prestige Estates.  Short build-up was visible in Tata Technologies - as the stock slipped 4.7 per cent alongside a 30.6 per cent rise in open interest. Inox Wind, L&T Finance and ACC also witnessed some selling pressure.  RBL Bank was placed in the F&O ban period – meaning fresh positions at the counter won’t be allowed till such time the stock remains in ban period. Only existing positions can be squared-off.