Foreign portfolio investors (FPIs) have raised their net long positions on index futures in the past week.
As of Friday, these investors were 76 per cent long in index futures. On Monday, this figure moved up further to nearly 80 per cent. The number of long contracts formed by FPIs stood at 5.25 lakh as on Friday, a record, beating the previous high of 5.13 lakh contracts as on July 18 this year. In value terms, the investors have added net longs to the tune of $1,366 million in the five days to Friday, data from Nuvama Alternative & Quantitative Research showed.
“FPIs added long positions as well as covered their shorts on Friday, indicating positive momentum in the backdrop of higher tops and higher bottoms,” said Chandan Taparia, derivatives analyst at Motilal Oswal Financial Services.
He added that the rising put-call ratio indicated that the FPIs are turning more towards the long side of the index and the Nifty rally could extend to 26,250-26,500, with support at 25,500 levels.
“FPIs’ long positions in index futures has gone as high as 86-88 per cent in the past. This means that the build-up of longs can continue and take the Nifty and Nifty Bank higher. Having said that, there is unlikely to be a sizeable upmove for the Nifty, and the upside may be capped at 26,200 levels,” said Soni Patnaik, AVP - Derivative Research, JM Financial Services.
Soni believes that a profit booking scenario will emerge only if the FPI longs drop below 65 per cent. In this scenario, 25,500 levels could act a good support for the Nifty. There’s a good possibility of Bank Nifty rallying another 500-600 points this September series, she added.
A follow-up buying in HDFC Bank, after its recent underperformance, has resulted in an upmove in Nifty Bank, said experts.
“Nifty could see a maximum move of 600-800 points on the upside but the same does not hold good on the downside. Once these institutional investors start offloading these long positions, the correction can take Nifty to 24,000 levels. This might not seem like a lot, but expecting a deep correction is futile owing to the cash pile currently held by dometic mutual funds which they would deploy on every dip,” said Rahul Ghose, CEO of Hedged.in.
“The technical and derivative metrics are at an extremely overbought terrain. It is advisable to proactively secure profits at regular intervals instead of adopting a complacent approach,” added Osho Krishan, Senior Analyst - Technical & Derivatives, Angel One.
FPIs bought ₹14,000 crore worth of shares in the cash market on Friday, with ₹7,000-8,000 crore of these flows coming on account of the semi-annual rebalancing effected by FTSE.
Nifty logged its third straight session of gains to settle at 25,939 on Monday.