FIIs bets in Nifty futures at 3-month high; data hints at more pain ahead

Last time FIIs held more than 3.5 lakh contracts as open positions in Nifty futures was in Oct 2024. At present, FIIs hold 5 short bets in Nifty futures for every long trade, shows the NSE F&O data.

The NSE Nifty 50 index dipped 1.4 per cent in trades on Tuesday, and has now slipped almost 2.5 per cent since the start of the year.  Technically, the Nifty formed a bearish engulfing candlestick pattern, with the day's body engulfing the candles of the previous six sessions, signalling an intensified bearish outlook, said Om Mehra, Technical Analyst at SAMCO Securities.  "The broader structure of lower highs and lower lows remains intact, indicating the continuation of the downtrend. Nifty also slipped below its 9-day EMA, suggesting weakening short-term momentum. The daily RSI tilted further downward now hovering near the 35 level, reflecting diminishing strength. The support is positioned at 22,800 and the primary trend remains decisively bearish", Om Mehra said in a note.  Meanwhile in the futures & options (F&O) segment, NSE data shows that foreign institutional investors (FIIs) open positions in Nifty futures has reached the highest in over 3 months. More importantly, FIIs have been net sellers in Nifty futures in the last 26 out of 32 trading sessions; i.e. since December 06, 2024 onwards.    FIIs overall open interest (OI) in Nifty futures stands near about 3.6 lakh contracts, as per the NSE data; whereas, the overall OI in index futures is 5.32 lakh contracts.  Historical data shows, that the FIIs held similar high open positions in index futures, particularly in Nifty futures, on October 08, 2024 when the Nifty quoted around 25,000 levels. The key difference around that was that FIIs had trimmed their overall bets in Nifty futures by 18 per cent, amid a near 5 per cent fall in Nifty during the September 26 - October 8 period.  Further, the data shows that the Nifty went on to fall another 5 per cent to levels of around 23,800 in the next one month as FIIs gradually lightened their positions.    At present, FIIs long-short ratio in index futures stands at 0.21 - implying presence of nearly 5 short positions in index futures for every long bet. In comparison, the FIIs long-short ratio on October 08 last year stood at 0.77; which later fell to 0.3 over the course of the next on month.  On the contrary, the other set of investors/ traders, retail investors, proprietary traders and domestic institutional investors (DIIs) hold long bets in index futures. Retail is the most bullish lot, with a long-short ratio of 2.5 - i.e. 5 long positions for every 2 bearish bets. DIIs and proprietary traders long-short ratio stands at 1.2 and 1.04, respectively.  F&O stocks with notable rise/ fall in OI  The NSE data shows that Supreme Industries has seen maximum short build-up in the last four trading sessions. The stock had declined over 9 per cent alongside a 53 per cent surge in open positions. Similarly, Dixon Technologies, Oberoi Realty, Axis Bank, Jio Financial Services and Zomato have witnessed a similar trend of fall in stock price and increase in OI.  On the other hand, LTTS has witnessed long build-up as the stock rose 11 per cent in the last four days, alongside 28.3 per cent jump in OI. Among others buying interest was visible in United Breweries and Wipro.