The Hindu Business Line : FIIs change tack: Turn buyers in derivatives

THE low foreign institutional investors (FIIs) inflows in January as compared to the past six months would have made investors worry. But such thoughts can be put to rest, now. There is indication from the derivatives segment that the FIIs are closing out their short positions.

The FIIs who were net sellers in both index futures and stock futures for most part of the month have changed tack. A person who is bearish would short (sell) futures to make profits. From the start of the month to just a few days ago, the FIIs have been net sellers in both index and stock futures; the long (buy) positions were lower than the short positions.

Over the past four days, however, the trend has changed. They have turned net buyers in stock futures. If the FIIs were still bearish on the underlying stock or index, they would have rolled over the short positions to the February contracts as the January contracts expire this coming Thursday. In case of rollover of positions, the open position, which indicates how many positions are active, would have remained same.

In the past two days, however, the open position of the index futures has been on a decline. On January 27, they were net buyers in index futures to a tune of more than 6,000 contracts. Open interest has also declined by about 3,000 contracts. On Wednesday, they were net buyers and open interest declined to about 20,873 contracts. This decline in open interest is a clear indication that FIIs have turned started closing out the short positions.

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