Domestic institutional investors (DIIs), primarily mutual funds, held $12.7 billion net shorts in single stock futures as on November 24 while in index futures, they held net shorts worth $901 million.
The build-up of short positions is not alarming and in line with their usual positioning, according to experts.
“The MFs mainly hold short positions in their arbitrage schemes and certain portion is used for hedging purpose in their balance schemes,” said Abhilash Pagaria, head – alternative and quantitative research at Nuvama Wealth.
The FPIs (foreign portfolio investors), on the other hand, have added long bets in index and single stock futures. Their net longs in index futures stood at 87,900 contracts, valued at $1.16 billion, against 23,300 contracts at the start of November series. Their net longs in single stock futures stood at 136,300 contracts, valued at $1.23 billion, against 117,300 contracts at the start of November series.
“The FPIs, who were net shorts until September end, have since changed their bets in index and single stock futures. Also, at the same time, they have bought $2.4 billion worth of equities in the cash segment in November till date. The overall bias is bullish,” added Pagaria.
FPIs have been buyers in financial services, IT, autos and capital goods in November.
“FPIs are unlikely to be major sellers going forward since their earlier policy of continuous selling in banking has cost them heavily. When FPIs were sellers earlier, DIIs were buyers and they gained from the FPI policy of sustained selling. The earlier FPI selling could be primarily attributed to the strengthening of the dollar. Now, the market construct in the US has changed to ‘rising equity, falling yields and falling dollar’. This is favourable for the continuation of FPI flows, going forward,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Market participants will focus on key macroeconomic data such as GDP numbers, core sector data, manufacturing and services PMI for cues. Auto sales numbers will start coming in from December 1. The performance of US equities will be tracked, with the Dow Jones Industrial Average reaching the critical hurdle of 34,300 and its break could further fuel a rally.
“We expect the prevailing trend to continue and expect Nifty to scale 18,700 first and then to a new milestone of 19,000. On the downside, the 18,100 zone would provide the needed support in case of any dip. Amid all, it would be important to see how the broader market participation pans out as that would play a critical role in strengthening the trend. While we’re seeing mixed participation across sectors, we reiterate our preference for banking and IT and suggest remaining selective in others,” said Ajit Mishra, VP – Technical Research, Religare Broking.