FIIs most bullish on Indian markets in 7 months; will the trend continue?

FIIs net bought over 30,000 contracts of Nifty futures in the last five days; thereby taking their long-short ratio to 0.94 - its highest point since October 4, 2024; shows the NSE derivatives data.

Foreign Institutional Investors (FIIs) have been net buyers in the NSE futures & options (F&O) segment for the last five straight trading sessions. Data from NSE shows that FIIs have net bought derivatives contracts worth ₹ 5,367.67 crore during this period.  Amid this, FIIs have predominantly bought Nifty futures - a total of 30,291 contracts in the last five days, thus resulting in a 44 per cent increase in open interest (OI) in Nifty futures since the start of the May F&O series.  The overall FIIs OI in index futures has increased by 20.6 per cent, with MidCap Nifty seeing 5.8 per cent addition; while Bank Nifty futures have seen a dip of 11.1 per cent in OI.  Backed by the recent buying activity, FIIs long-short ratio in index futures has now risen to its highest point since October 4, 2024, at 0.94 - this suggests that FIIs are most bullish in 7 months.  The long-short ratio bascially the number of open positions on the buy side of trade in the index futures versus number of open positions in the sell side of trade. The ratio below 1 implies higher open positions on the sell side of trade and vice versa.  Nandish Shah, Senior Derivative Analyst at HDFC Securities reckons that the rise in FIIs long-short ratio in conjunction with renewed buying interest in the cash market is a good sign for Indian stock market. The analyst believes that the FIIs long-short ratio could soon cross 1.  The analyst, however, cautions that the F&O market is a smaller segment for FIIs. Their trading activity in the cash market, alongside the USD-Rupee movement, holds the key for the near-term trend in the market. For the records, FIIs have been net buyers in the cash market for the last 12 straight trading sessions.    Among the other participants, Domestic Institutional Investors (DIIs) long-short ratio stands at 1.92 - implying presence of 2 long bets in index futures for every short trade. In comparison, retail investors and proprietary traders long-short ratio stands at 0.8.  Here's what Nifty options data suggests  Derivatives data paints a picture of cautious optimism. While Call writers have aggressively built positions at higher strikes, a lack of strong Put writing at higher levels signals restrained bullish conviction, says Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities in the note.  The 24,500 Call strike holds substantial OI, reinforcing it as a key resistance zone. Meanwhile, significant Put writing at the 24,000 strike (89.79 lakh contracts) has established this level as immediate support. Max Pain remains static at 24,400, pointing to a market in equilibrium, awaiting a breakout cue, read the note.