Foreign portfolio investors (FPIs) continued to unwind long positions in index futures on Monday along with sharp selloff in the cash market, in a bid to take the risk off table due to global macroeconomic and geopolitical uncertainties. The net open interest position of FPIs in index futures fell by 34,924 to 1,10,185 contracts, according to NSE data. The decline was steeper compared to Friday when FPIs had reduced their open interest in index futures by 21,170.
FPIs also cut their net long positions of call options sharply by 1,59,074 to 2,09,638. On the other hand, they lowered their net open interest positions in put options by 1,04,119 to 3,69,516. However, this was still higher compared with 1,42,699 open interest positions at the end of Thursday, analysts said. Experts believe the overall positioning by FPIs indicates caution and the possibility of a further correction in the market in near term. On Monday, FPIs sold shares worth $1.2 billion in India.
The broad-based selloff saw Sensex and Nifty falling 2.7% each to close at their lowest levels in a month at 78,759.40 points and 24,055.60 points, respectively. The sharp fall sent the premiums on major index put options soaring. The Nifty put option on 24,000 strike saw an over 1,275% surge in its premium to Rs 185 while the premium on Nifty Bank’s 50,000 points put option jumped by nearly 600% to Rs 371.5.
“The price action that we saw on Monday points to the need to exercise caution. We may see further correction in the market with the potential for Nifty to fall till 23,400-23,500 points level,” said Sriram Velayudhan, senior vice president of alternative research at IIFL Institutional Equities.