Foreign Institutional Investors (FIIs) appear to have become bearish. This is reflected in their reduced activity in both the cash and derivative segments since October 15?around the time markets regulator Securities & Exchange Board of India (Sebi) unveiled its draft proposals restricting the issue of participatory notes by FIIs and their sub-accounts.
In the cash segment FIIs have gradually reduced their buying and in the derivatives segment, foreign players have consistently sold stock futures, barring three occasions when they were net buyers.
VK Sharma, director, Anagram Stockbroking says, ?Foreign players seems to have changed their strategy in the cash as well as derivatives market, even as some sections are trying to pull the benchmark northward. FIIs have slowed their buying in the cash segment since October 16. They have not only closed their long positions in stock futures but have also started building fresh short position in stock futures.?
On November 2, FIIs sold stock futures worth Rs 684 crore, while on November 5 they were net sellers of stock futures worth Rs 280.37 crore. A similar trend of FIIs selling in individual stock futures in the range of Rs 100-600 crore daily was seen in the previous month since October 15.
However, since October 25 (when Sebi came out with its final guidelines on PNs), FIIs were net buyers in the derivatives segment on a consolidated basis. However, market experts say this is mainly because hefty purchases in index futures offset their net selling in stock futures.
Market experts believe that the buying in index futures is part of FIIs? hedging strategy against exposure in the cash market, while selling in individual stock futures has two objectives: partly to arbitrage gains and to benefit from downward bearish movements in the market.
