Nifty: FPIs cut down bullish index bets as Covid surge spurs macro worries

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MUMBAI: In a clear sign of growing concerns over the economic fallout from surging Covid cases, foreign institutional investors (FIIs) have sharply cut their bullish bets on Nifty and Bank Nifty futures. Coupled with cash market sales, this has dragged down the Nifty by 2.7% over the past three sessions.

While selling ₹4,821 crore of shares so far this month, FIIs cut their cumulative bullish bets on the Nifty and Bank Nifty futures from 52,927 contracts on April 29 to just 4,487 contracts on May 4. Last month they net sold shares worth ₹9,659 crore, show NSDL data.

A bull buys a futures contract, while a bear sells a futures contract.

“Fears are growing among market participants that selling of cash and futures by strong hands (FIIs) could see the Nifty breach the crucial support of 14,200-14,150 made last month,” said Siddarth Bhamre, director, alternative investments and research at InCred.

The market has been wedged in a range of 14,250 -15,050 since the past month, with strong resistance cropping up near the upper band.
Sunil Pachisia, head of institutional sales at Pratibhuti Vinihit, sees the lower end of the range which was briefly breached last month giving way if FII sales continued “apace”.

Most participants concur that the market had changed from “buy on dips” to “sell on rise,” said Rajesh Baheti, MD of jobbing firm Crosseas Capital.

A decisive break of 14,200 could drag the Nifty down to the pre-Union Budget low of 13,596.75, he added.

Nifty active futures expiring on May 27 have seen outstanding buy-sell positions rise from 94.53 lakh shares (75 shares make one contract) on April 29 through 1.1 crore shares on May 4, as the Nifty corrected from 14,894.9 to 14,496.5 over the same period. A rise in outstanding positions coupled with falling asset prices indicates bearish sentiment.

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