FIIs up shorts in Nifty futures, net sell 50K contracts in 3 days: F&O data

Despite Monday's sharp recovery, FIIs were net sellers of ₹1,228 crore in index futures yesterday. Here are the key highlights from the derivatives data.

Despite the near 350-point rally on the Nifty from the lows of the day on Monday, the NSE futures & options (F&O) data shows that foreign institutional investors (FIIs) remained net sellers in the derivatives segment for the fourth straight trading day.  The NSE Nifty staged a sharp pullback from a low of 25,473 to a high of 25,813 following the US Ambassador to India, Sergio Gor's statement that US-India trade deal talks could take place on Tuesday, January 13. The Nifty eventually ended the day with a gain of 107 points at 25,790.  Meanwhile, the NSE F&O data shows that FIIs net sold index futures to the tune of ₹1,227.84 crore on Monday. In the process, FIIs have now net sold index futures worth ₹11,157.92 crore in the last four trading sessions.   

 

 

  More importantly, data shows that FIIs open interest (OI) in Nifty futures has increased by 38.5 per cent in the last three trading sessions. During these three days, FIIs net sold 49,624 contracts of Nifty futures, while the Nifty slipped 1.3 per cent.  The above numbers clearly imply that FIIs have been adding short positions in Nifty futures in the recent trading sessions, given the net sales and corresponding rise in the OI.  Further, the NSE data shows that FIIs long-short ratio in the index futures now stands at 0.08. The long-short ratio compares the buy-side OI against sell-side trades. Thus, the data implies that FIIs currently hold around 92 per cent of their OI on the short-side of trade.

What are other  market participants doing?

  Against this, domestic institutional investors (DIIs) and retail investors long-short ratio stands at 2.0 and 2.8 - implying presence of up to 3 long positions for every short side trade by these traders. Proprietary traders long-short ratio stands at 1.6.  Analysts reckon that a lower long-short ratio, such as 0.08 tends to provide cushion for the market on the lower side. 

Nifty outlook

  Market experts believe that the markets may remain volatile in the near-term amid the ongoing US tariff discussions and Q3 earnings.  From a technical standpoint, Osho Krishan, Technical and Derivative analyst at Angel expects the Nifty to face intermediate resistance around 25,900 (50-DEMA) followed by a strong hurdle at 26,000-mark, which coincides with the 20-DEMA.  "A decisive breakthrough above these levels could only reignite bullish sentiment in the upcoming session. On the lower end, 25,680 - 25,650 remains a pivotal support zone and is likely to cushion any shortcomings, while the recent swing low, coinciding with the November month closure around 25,500 - 25,470, is likely to be the sacrosanct support zone," said Osho Krishan in a note.  On similar lines, Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities says that sellers are likely to retain their grip near higher levels as long as the Nifty remains below the psychological 26,000 mark.  As per the analyst's view, the Nifty seems confined within a broad trading range of 25,500 – 26,000.  "A decisive breakout on either side of this band is likely to dictate the next directional move," said Dhameja in a note.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.