FIIs’ stock futures positions near all-time high, highly leveraged on long side

Foreign institutional investors increased their long positions in single stock futures, and reduced net short positions in index futures towards the monthly settlement at the end of the March F&O series.

FIIs started the new April derivatives series with $4.93 billion holdings in single stock futures, which is near the all-time high level of $5.03 billion recorded on December 26, 2019. In single stock futures, their net long positions stood at 4.48 lakh contracts versus 78,000 at the start of March series.

FIIs’ long holdings in stock futures near all-time high

With this, FIIs are now holding heavily leveraged positions on the long side, said Abhilash Pagaria, Head of Nuvama Alternative and Quantitative Research.

“Similar positioning was observed at the end of December 2019 and around June 2020. Historically, during phases of such heavy long positioning, markets have tended to languish and trade within a range of 200-400 points for the next few days,” he added.

“Due to the roll activities, significant stock specific action was observed and FIIs have bought nearly 8,600 crore in stock futures last week,” ICICI Securities said in a note on April 1.

FIIs cut short positions in index futures

In index futures, they have started the new month with less than 24,000 net shorts, which is the lowest seen in a month. This was down from 59,000 short index futures contracts at the start of March series.

Read more: Which stocks and sectors will be in focus in April Series as per rollover data?

“In the F&O space, FIIs have closed some more shorts in index futures towards the monthly settlement. FIIs are starting the April series with nearly 24,000 net shorts in index futures. On the other hand, retail participants remained net longs,” said ICICI Securities in a note on April 1.

“I believe the markets could rally towards 22,600 before encountering resistance. On the bullish side, we favour the entire metal sector, while on the bearish side, we are cautious about FMCG stocks,” Pagaria added.

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