FIIs cut short bets in Nifty futures; analysts see further upside

As per the data from the NSE F&O segment, foreign institutional investors now hold 3 short positions in index futures for every long trade as against 5 bearish bets held earlier.

Derivative Market Update: Foreign Institutional Investors (FIIs) were net buyers in the derivative market segment for the second straight day on Tuesday as equity benchmark indices logged back-to-back gains.  On Tuesday, FIIs net bought stock and futures worth Rs 4,761.36 crore in the derivative segment; while the BSE Sensex and Nifty settled up to 1.5 per cent higher.  Technically, the Nifty crossed the hurdle of the bearish gap placed at 22,668 – 22,720 and formed a bullish candle on the daily chart, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.  Moreover, the Nifty surpassed the 22,800 level, which was the previous breakdown point, indicating strength. Immediate support for the Nifty is placed near 22,700, while trend line resistance is positioned around 23,000-mark, the analyst added.    According to data from the NSE derivative segment, FIIs open positions in index futures have declined over 8 per cent in the last two trading sessions from 2.95 lakh contracts to 2.71 lakh contracts as of March 18.  Data reveals that FIIs reduced open positions, mainly short bets in Nifty futures, by around 9,800 contracts or around 6 per cent. Similarly, the OI (open interest) in Bank Nifty and MidCap Nifty futures have declined by 12.5 per cent and 7.5 per cent, respectively.  As a result, FIIs long-short ratio in index futures rose to 0.32 - its highest level since January 29, 2025 - this ratio implies that FIIs still hold 3 short bets in index futures for every long position. Prior to the last two trading sessions, the ratio stood at 0.23 - implying presence of nearly 5 short positions in index futures for every long bet.  In comparison, retail investors' long-short ratio in index futures dropped below 2 - for the first-time since December 24, 2024. Retail investors long-short ratio now stands at 1.88 - still implies presence of 2 long positions in index futures for every short trade.    Meanwhile, domestic institutional investors (DIIs) hold 2.5 bullish positions for every short trade; and proprietary traders hold 2 short bets for every long trade in index futures as of Tuesday.  The Nifty derivatives data highlights a firm bullish undertone, with Put writers aggressively strengthening their hold over Call writers, showcasing optimism among market players, said Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities in a note.  A massive open interest build-up at the 23,000-Call strike underscores it as a tough resistance. Meanwhile, heavy put writing at the 22,500 level signals solid support, further validating the bullish trend. The Put-Call Ratio (PCR) climbed from 1.02 to 1.42, reflecting an increasing bullish sentiment as traders initiated fresh long positions.  The Max Pain level for the Nifty stands at 22,700 suggests that bulls are working to neutralize selling pressure, ensuring a smoother upside trajectory, the analyst added. 
 

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