Foreign portfolio investors’ (FPIs) short positions in the index futures have hit a one-year high, indicating that the relentless selling by them since the beginning of 2025 could continue for some more time.
According to data from the NSE, FPI’s net short positions stood at 201,567 (number of contracts). And it has jumped 38% since the start of 2026 and more than doubled in less than two months. Even its short position as a percentage of total position is at 90.8%.
In June, their short position as a percentage of total position stood at around 60%.
However, since mid-July, it has been hovering between 80% and 94%. According to technical analysts, when this number crosses 90%, it is generally assumed that the market has reached an oversold zone and there could be a bounce back – something that happened in end-September when FPI net short positions touched 94%, the Nifty rallied more than 5.5% in less than a month.
Prolonged Selling Pressure
However, given the continued spate of bad news due to tariffs by the US and earnings disappointment, FPIs positions have continued to languish in that zone for a rather quite some time. Since the beginning of 2025 till date, FPIs have sold over Rs 1.9 lakh crore – the longest and biggest selling spree.
The impact of this heavy selling has reflected in the performance of benchmark indices, which are at a three-month low. The total market cap has also slipped below the $5 trillion mark for the first time in eight months.
In a report on Wednesday, UBS gave a few reasons for being underweight on India.
“We remain underweight… despite a stark underperformance compared to EM in 2025 on current weak nominal GDP growth trend, MSCI India’s fundamentals tracking weaker than the rest of EM, a lack of clear AI beneficiaries in the listed space, and valuation premiums still higher than usual.”
U R Bhat, director, Alphaniti Fintech explained, “Most FPIs first look at asset allocation across markets rather than giving primary focus to companies. They find which are the markets that are likely to do well based on the current state of play. It is not that they don’t like India or that the Indian economy is not doing well.”
Global Uncertainty Rises
He added that every investor in equity faces uncertainty in terms of how the future will unfold. The current heightened level of uncertainty and the lack of clarity in Trump’s geopolitical announcements were never seen before. That is why investors are getting out of risk assets and shifting to those which can protect value till the fog clears.
“The current uncertainty has not got much to do with India, but with what happens on the global front, such as oil prices, export competitiveness, movement in US-dollar currency and bonds,” he said.
Kranthi Bathini, director of equity strategy at WealthMills Securities believes that FPIs are also shifting their focus to China and South Korea, as they have performed better. Also, given that there is no actual timeline for the US-India trade deal has added to the worries.
UBS, however, believes that external headwinds from higher US tariffs (which came into effect from August 2025) were somewhat offset by resilient domestic demand, adjustment in direct and indirect taxes, front-loading of government capital expenditure and supportive monetary policy.