The short positions of foreign portfolio investors (FPIs) in India’s index futures segment has halved from the last week. Data from Indiacharts (the derivative market tracker) shows that last week, the FPIs held net short positions of 110,000 contracts in the index futures segment, mainly comprising Nifty and Bank Nifty, has now declined to 63,675 as on Tuesday. 

Data also reveals that FPIs short positions in the index derivatives segment had touched 112,000 contracts in the index derivatives on February 2 after building shorts on January 25, the day when volatility suddenly spiked following the Hindenburg Report on Adani Group. The net short position in the index futures kept rising sharply since then.

“FPIs had added large shorts in index futures in the wake of the Adani crisis. The sharp reduction in positions reflects the waning of risk perception. Steady purchases in the cash market reflect a return to risk taking by foreign investors. A breakout above 17,960 should further result in more short covering and improve market sentiments,” said Rohit Srivastava, strategist, Indiacharts.

FPIs net buyers in cash segment

Provisional stock exchange data shows that FPIs stood to buyers in the cash equity segment for three consecutive days up to Tuesday. Still for the month so far, FPIs were net sellers of ₹2,786 crore in the cash equity markets. In the index futures segment, the FPIs had turned net buyers of ₹2,885 crore in February so far, indicating reduction in their previously built short positions. In the stock futures segment, the FPI were net buyers to the tune of ₹2,677 crore for February so far. Large FPI buying in the futures segment was seen on Tuesday as data showed their making ₹3,773 crore worth index futures purchases in a single day and ₹1,994 crore in the stock futures.

In the cash segment, FPIs sold stocks worth ₹41,464 crore in January this year and ₹14,231 crore in December 2022.

Share prices of Adani Enterprises, Adani Ports and SEZ and the group’s two listed cement companies Ambuja and ACC have seen a fall in volatility and even gained sharply from their low levels hit on February 2. But the share price of other Adani Group companies, including Adani Total Gas, Adani Power, Adani Greens and Adani Transmission are still locked in 5 percent lower circuit for consecutive sessions since the cancellation of the follow-on public offer of Adani Enterprises on February 1. 

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