FIIs turn net short on Nifty, index futures, cut long bets as geopolitical concerns drag markets

Despite some recovery on Friday, Nifty lost more than 1.5 percent last week and closed below 22,200.

Foreign Institutional Investors (FIIs) converted their bullish positions into bearish bets last week due to ongoing geopolitical concerns, turning from net long to net shorts in index futures. FPIs’ (Foreign Portfolio Investors) long-short ratio in NSE index futures flipped to 35 to 65 on Friday, from 56-to-44 a week earlier.

Follow our market blog for live updates

The long-short ratio in index futures is a measure of the number of bullish positions versus bearish. A low reading means foreign investors are bearish. The ratio is cumulative of all the indices including Nifty, Bank Nifty, Finnifty and MidcapNifty.

FIIs sold more than 10,000 crores of cash equity last week. ICICI Securities said that FIIs have turned negative for the overall month April as they sold nearly 13,500 crores in secondary markets.

FIIs’ net longs of nearly 33,000 contracts turned into net shorts of more than 1 lakh contracts, said ICICI Securities. "In the F&O space, FIIs’ have suddenly changed their stance and they shorted significantly in index futures as well as stock futures,” it added.

On the other hand, domestic institutions tried to provide cushion and bought nearly Rs 9,000 crores cash equity from the markets last week. “Retail participants increased their net longs sharply last week as Nifty declined by more than 2 percent," said ICICI securities.

While FIIs have a negative stance going by the index futures long-short ratio, they bought Nifty futures and very minor positions in Finnifty. But they were sellers in Bank Nifty and Midcap Nifty. So the view is slightly more positive for Nifty,” said Avani Bhatt, Senior vice president -- Derivative research at JM financial.

Nifty may gain to VWAP Levels, volatility rings caution; avoid aggressive longs

Global uncertainties kept the markets under pressure for most part of the week and Nifty tested its lowest levels seen in a month. Despite some recovery on Friday, Nifty lost more than 1.5 percent last week and closed below 22,200. Going ahead, ICICI Securities believes that, "Nifty may attempt to move towards its VWAP (volume-weighted average price) of 22,500 in the settlement week with immediate support placed near 21,900 levels."

"Due to significant recovery seen on Friday, aggressive Put writing was observed at 22,000 strike which holds the highest OI base for the monthly settlement," added the brokerage firm.

Avani Bhatt highlights that technically, Nifty formed a piercing candle on the daily charts after taking support near the 20-week EMA which currently stands at 21,754 on the weekly charts. This is positive development hinting at continuation of up-move.

"Sharp recovery & a weekly close above 22,100 post gap down opening further confirms a temporary bottom in 21750-800 zone for the month. Pull-back to continue for a re-test of 22350-400 area, However, India VIX above 13 percent rings caution suggesting not to get carried away in the sharp pull-backs. NIFTY will be out of the woods only on a close above 22,400," said Bhatt.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.