📷 Image Credits: Moneycontrol
In a significant development, Foreign Institutional Investors (FIIs) have made a bold move by adding the highest ever net index shorts in a single session in the history of the market. This move comes as FIIs dramatically reduced their long positions ahead of the general election results, signaling caution and uncertainty in the market landscape. On May 30, the markets experienced a dip, with benchmark indices Sensex and Nifty closing down nearly 1 percent each. The market experts anticipate continued volatility and range-bound trading leading up to the exit polls and election outcomes.
The FIIs recorded a substantial addition in net shorts, increasing from 5,000 contracts to an impressive 2.97 lakh contracts in a single session on May 30. Simultaneously, there was a notable decrease in long positions, with FIIs reducing them by 80 percent, dropping from 257,000 contracts to 51,000. This sharp decline in long positions resulted in the FII long-short ratio plummeting from 50 percent to just 13 percent in a single day, reflecting heightened caution and uncertainty ahead of the highly anticipated election results.
Moreover, on May 30, FIIs engaged in heavy selling activities, with a net sale of a total of Rs 19,417 crore in Indian equities, across cash, index futures, and stock futures. However, a ray of hope emerged with the MSCI rebalancing set to take effect from May 31, expected to bring in an inflow of approximately $2.5 billion to the market. The quarterly rebalancing by MSCI will see 13 new stocks being added to the MSCI Global Standard Index, while three stocks will be excluded, thereby boosting India’s weight in the MSCI EM Index to 18.8 percent.
As the market gears up for the election results, experts predict a weak start to the June series with heavy FII shorts in index futures. Akshay Bhagwat, VP of Derivative Research at JM Financial, highlighted the cautious positioning by FIIs in index futures ahead of the election outcome, emphasizing that positions remain light in anticipation of the event. Short-term momentum indicators have also turned neutral, and the key Nifty level of 21,800 will play a crucial role in determining the future trend.
Leading up to the election results, market analysts are closely monitoring Nifty’s support, resistance levels, and trading range. Sudeep Shah, Head of Derivative and Technical Research at SBI Securities, expects the zone of 22,250-22,270 to act as immediate support for the index. In a bullish outlook post-election results, Shah believes that the 22,700-22,750 zone will serve as an immediate upside hurdle, with further potential for a rebound.
Overall, the market sentiment remains cautious and uncertain as FIIs have significantly adjusted their positions in preparation for the election results. The upcoming period is likely to witness heightened volatility and market movements influenced by the outcome of the elections.
