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FIIs cut bearish bets on index futures

Srivastava expects the FII short covering in index futures to continue .

, ET Bureau|
Updated: Sep 02, 2019, 11.13 AM IST
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Tech View: Nifty50 loses another key support; forms bearish candle
Short-covering involves purchasing what was sold and this covering typically results in a rally .
Mumbai: Foreign institutional investors (FIIs) on Friday reduced their outstanding net bearish position on index futures – Nifty and Bank Nifty – from the highest level in five years through August 29. This has driven hopes of a short-term bounce in the market among a few derivatives and technical analysts, even as others expect the market to remain rangebound with a negative bias.

From a net short position of 142,760 index futures contracts on August 29, the FIIs cut their short positions by 39,876 contracts to 102,884 contracts on August 30. Along with provisional purchase by them of Rs 1,163 crore shares that day, the short-covering resulted in the Nifty recovering almost 150 points from the day’s low to close at 11,023.25, up 0.68 per cent.

Short-covering involves purchasing what was sold and this covering typically results in a rally .

To be sure, GDP data released post markets on Friday, showing that the economy grew at its slowest rate of 5 per cent in the June quarter could dash the hopes of these analysts when markets re-open Tuesday after the Ganesh Chaturthi holiday.

Among the optimists of a shortterm bounce which could drive the market to 11,200 and possibly further, are Chandan Taparia of Motilal Oswal Financial Services and Rohit Srivastava, founder, India-Charts, a market analysis online portal.

Taparia believes an economic growth slowdown has already been “priced in” by the market and so “chances of a temporary rally are higher.”


He added that traders could buy a Nifty 11000 call and sell an 11200 call expiring on September 26 to play for a bounce.

Srivastava expects the FII short covering in index futures to continue .

However, UR Bhat, director, FII advisory at Dalton Capital Advisors, expects the market to react negatively to the GDP number on Tuesday. He expects the Nifty to trade between 10,800 and 11,200 with a negative bias, for now. He added that if the 10,800 support was broken, the market could test 10,500.

Rajesh Palviya, technical head of Axis Securities, also believes the market was likely to remain under pressure due to the lowerthan-expected GDP numbers and fears of a prolonged slowdown.

Monthly Nifty options contracts expiring on September 26 indicate an initial range of 10,800-11,200. The next support follows at 10,600 while the second resistance kicks in at 11,700.

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