Fireworks in equity markets likely to continue

PALAK SHAH Mumbai | Updated on September 23, 2019 Published on September 23, 2019

FPIs hold 64,000 contracts of net short positions in the NSE futures segment

Friday’s fireworks in equity markets, which saw the Sensex and Nifty rise by 5.32 per cent in a single trading session, are likely to continue in the coming week, too.

Data shows that foreign portfolio investors (FPIs) still hold around 64,000 contracts of net short positions in the futures segment on the National Stock Exchange (NSE). The same was around 1.2 lakh contracts last week. A huge amount of short positions simply mean that markets could rally as funds cover their positions. FPIs could step on the gas pedal to cover their short positions on account of monthly derivative expiry on Thursday.

FPIs tend to let their position expire at the end if the markets do not witness sharp moves or they roll it over to the next month. This time, FPIs will have no option but to cover their entire positions as the markets have already moved up sharply. Holding on to short positions or rolling them over could burn a hole in their pockets, experts said.

Most believe that the FPI net short position will fall to zero and unwinding of all 64,000 contracts could push the markets way higher. “The FPI net short position falling to zero may not be the end of the game. Like the madness we saw on the short side, now wait for the markets to go on another extreme on the long side, too. ...another Nifty rally seems a major possibility,” said Rohit Srivastava, Founder and Chief Strategist, IndiaCharts.

BusinessLine had reported on September 4 and 17 that a massive bout of short covering was expected due to near-record levels of short built-ups in both the futures and options segment. The announcement of sharp corporate tax cuts by the Finance Minister Nirmala Sitharaman proved a trigger for the short covering.

FPI buying

On Friday, FPI buying in the cash segment was zero, which giving rise to hopes that fresh buying from them will take place in the coming days.

Data showed that FPIs stood to be net buyers of a measly ₹35 crore in the cash segment while domestic institutional investors pumped in ₹3,000 crore in a single day last week.

FPIs have withdrawn around $4.5 billion from India’s market in recent months.

Published on September 23, 2019
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