Domestic investors pare ₹23,600 crore worth holdings in stock futures

PALAK SHAH Mumbai | Updated on April 12, 2020

Of the $8.83 billion worth of stock futures outstanding as on April 8, 99% held by FPIs

Holding of Indian equity traders including institutions, high net-worth individuals and retail clients in the stock futures segment has dipped to a historic low on the National Stock Exchange (NSE) in April. They held less than 0.5 per cent of the entire stock futures position on the NSE, something seen only four times in the last 12 years since the fall of Lehman Brothers in 2008, exchange data show.

Of the total ₹67,148 crore ($8.83 billion) worth of stock futures outstanding as on April 8, domestic traders held positions worth a measly ₹106 crore. The rest — ₹67,042 crore ($8.82 billion) of holding — belonged to foreign portfolio investors (FPIs).

In the 23 trading sessions in March, the Sensex and the Nifty suffered a crash of 34 per cent, the largest monthly fall since October 2008. On February 28, when the Nifty stood at around 11,500, domestic traders held stock futures position worth ₹23,734 crore. They gave up 99.55 per cent of it in the March crash.

But FPIs mostly held on to their stock futures position even in March, experts say. Their stock futures holding value declined only by 21.82 per cent in line with the market fall. FPI stock futures holding value, which was ₹85,760 crore at the start of March, came down to ₹67,042 crore as stock prices fell. Before last weekend, as markets gained, the position of domestic traders stood at ₹405 crore, and FPIs’ at ₹70,120 crore.

“Data is a clear indicator of how panic struck and 99 per cent unwinding of stock futures by domestic traders largely caused the crash. But FPIs held on to their position and the markets reversed sharply. It is also evident from Nifty’s recent fastest 20 per cent rally from 7,511 to 9,000. Now domestic traders hold only ₹455 crore worth stock futures based on which market moves can be judged,” said Deepak Sawhney, independent data analytics expert, who has mined the above data.

‘Covered short positions’

“Data show that FPIs have largely covered their short positions across segments and even reduced their index futures holding. The stock futures position should be keenly watched, which will decide the market direction,” said Sanjiv Chainani, MD, Valueline Advisors.

Domestic traders held stock futures worth ₹82,786 crore in January 2018, their life-time high. This was at the peak of small/mid-cap rally. Then, FPIs held stock futures worth ₹74,988 crore. In January 2020, when the Nifty was above 12,000, stock futures position of domestic traders was about ₹25,000 crore to ₹30,000 crore. The same for FPIs stood at over ₹1,05,000 crore.


Published on April 12, 2020

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