Investors carry more than $1 billion in bearish bets ahead of Jackson Hole

Investors in India are carrying more than $1 billion in bearish positions on the Nifty 50 index ahead of the crucial Jackson Hole Symposium, which starts later today.

The annual symposium will see the US Federal Reserve’s Chairman Jerome Powell set the tone for the central bank’s monetary policy action going ahead just like it did a year ago. The symposium comes in the backdrop of Fed having to acknowledge its error on inflation being transitory last year as it raised interest rates by 225 basis points since March.

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The Fed is now facing questions over whether the US economy has already entered a recession after GDP contracted for two consecutive quarters, often considered a recession, and a property market seeing a precipitous slowdown. Fed members have maintained that the US economy is not in a recession as the labour market, a key component, is still thriving.

Money markets in the US are suggesting that Fed may halt rate hikes by December as the US economy continues to slide into recessionary territory amid slowdown in other major economies such as Europe and China.

“We think that the Fed will be done with rate hikes after September,” Marc Matthews, managing director Bank Julius Baer told Moneycontrol in a recent interview.

The more than 15 percent rally in global equities since mid-June suggests investors are expecting the Fed chief to tone down hawkishness over rate hikes especially as recent inflation readings have shown a moderation in pace of price rise as well as inflation expectations.

Bears, however, feel differently as reflected in the quantum of bearish bets on the Nifty 50’s futures contract taken as of August 25, a day ahead of the Symposium. Leading the bear pack are foreign portfolio investors who hold net short positions of nearly 31,000 contracts on the Nifty 50 futures.

Additionally, domestic institutional investors and proprietary traders are also carrying net short positions on 36,205 contracts of the Nifty 50 index futures, as per data available on the National Stock Exchange.

The notional value of the 67,051 bearish contracts on the Nifty 50 index is currently nearly Rs 9,000 crore. Globally, investors are carrying net short positions with notional value of more than $125 billion on the S&P500 index ahead of the Syposium, according to media reports.

“In my view, Nifty may move in the 16,250-18,750 range, with occasional violation on either side, in the next 6 months,” said Amit Kumar Gupta, founder at Fintrekk.

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