12,140.8533.95
Stock Analysis, IPO, Mutual Funds, Bonds & More

FIIs reduce 'Bullish on India' bets as global worries mount

Analysts said concern over the impact of the US presidential election outcome on emerging markets, rich stock valuations in India and heightened expectations of rate increase by the Fed in December have prompted these investors to cut their long positions here.

, ET Bureau|
Updated: Nov 03, 2016, 10.04 AM IST
0Comments
Data show overseas investors' net long positions in Nifty futures have dropped by over 75% from the September highs as they dumped shares worth Rs 5,000 crore in October -their first monthly selling since February.
Data show overseas investors' net long positions in Nifty futures have dropped by over 75% from the September highs as they dumped shares worth Rs 5,000 crore in October -their first monthly selling since February.
Mumbai: Foreign portfolio investors have been steadily paring their bullish derivatives bets on Indian stocks in the run-up to the US elections next week and US Federal Reserve's meeting on Wednesday. Data show overseas investors' net long positions in Nifty futures have dropped by over 75% from the September highs as they dumped shares worth Rs 5,000 crore in October -their first monthly selling since February. Analysts said concern over the impact of the US presidential election outcome on emerging markets, rich stock valuations in India and heightened expectations of rate increase by the Fed in December have prompted these investors to cut their long positions here.

“Foreign investors have been selling in the cash market for the last 20-25 days and their net long positions in the index futures have dipped below 1 lakh contracts which indicates that flows from their side are coming down,“ said Hemant Nahata, head of derivatives at IIFL Wealth.

Data on NSE's website showed foreign portfolio investors' (FPI) net long positions in the index futures -mostly Nifty -stood at 81,785 contracts as of Wednesday .On September 1, the net long positions were 3.6 lakh contracts.Analysts said FPIs have been simultaneously buying Nifty puts as hedges against any market fall.

“FPIs have been hedging their positions as well as liquidating long positions in the index futures.From the start of this series, we have seen activity in 8200 put as well,“ said Chandan Taparia, derivative analyst at Anand Rathi.

“If the level of 8,500 is not respected, then the index can fall to 8,300,“ said Taparia. To play the volatility ahead of the US Presidential election, Taparia advises taking a long strangle strategy by buying Nifty 8700 call option at Rs 67 and Nifty put option at Rs 77.

The long strangle strategy involves simultaneous buying of an out-ofthe-money put option and an out-ofthe-money call option of a particular stock with the same expiration date.The strategy has limited risks and is used when an options trader thinks that the underlying stock will experience significant volatility in the near term.

Some derivative analysts believe that it is the banking stocks which may knock the Nifty below the crucial support of 8,500.

“Not much of short positions h ave been adde din Nifty November futures on Wednesday but as the Bank Nifty is seeing huge shorting pressure, the Nifty is likely to breach the 8,500 mark and that will lead to higher shorting pressure in Nifty futures as well,“ said Manoj Vayalar, AVPderivatives at Religare.

Vayalar advises buying the Bank Nifty 18500 put option at around Rs 130-140 for a target of Rs 220 in this series to protect against any sharp fall in the index.

Also Read

Mutual funds, FIIs cut holdings in this multibagger in Q3

India sees highest FII inflows in Asia since 2014

Here’s what will decide if FIIs will stay put in Indian equities in 2020

Beware! Dalal Street is climbing a wall of worry; FIIs, DIIs diverging

Sensex hits fresh record high on strong Asian cues, FII inflows

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service