FIIs' bearish derivatives bets on India surge to a 5-month high

Time of India

19 hours ago

Mumbai:
Overseas fund managers
' bearish derivative bets on India are at a five month-high as simmering uncertainties around tariffs and rich share valuations have made them wary about the market's near-term prospects.
The long-short ratio-a
market sentiment indicator
that compares the number of traders betting on a rise in prices (long positions) to those betting on a fall (short)-based on foreigners' derivative positions stood at 15% on Friday-lowest since February 21.
Explore courses from Top Institutes in
Select a Course Category
Leadership
Digital Marketing
Cybersecurity
others
Data Science
Product Management
PGDM
healthcare
Project Management
Data Analytics
Degree
Management
Artificial Intelligence
Technology
Healthcare
MCA
CXO
Others
Operations Management
Data Science
MBA
Public Policy
Design Thinking
Finance
Skills you'll gain:
Duration:
12 Months
IIM Kozhikode
Advanced Strategic Management Programme
Starts on
undefined
Get Details
Skills you'll gain:
Duration:
10 Months
IIM Indore
Executive Programme in Business Management
Starts on
undefined
Get Details
Skills you'll gain:
Duration:
12 Weeks
IIM Kozhikode
CERT-IIMK EPIS Async India
Starts on
undefined
Get Details
Skills you'll gain:
Financial Accounting & Analysis
Financial Instruments & Markets
Corporate Finance & Valuation
Investment Management & Banking
Duration:
12 Months
IIM Kozhikode
IIMK Professional Certificate in Financial Analysis and Financial Management
Starts on
Mar 30, 2024
Get Details
Skills you'll gain:
Duration:
11 Months
IIM Lucknow
CERT-IIML SLP India
Starts on
undefined
Get Details
Skills you'll gain:
Critical Thinking & Decision-Making Skills
Power of Emerging Technologies
Innovation and Drive Organizational Change
Fostering a Culture of Innovation
Duration:
9 Months
MIT xPRO
MIT Technology Leadership and Innovation
Starts on
May 14, 2024
Get Details
Skills you'll gain:
Duration:
10 Months
IIM Kozhikode
CERT-IIMK-Women Leadership Programme INDIA
Starts on
undefined
Get Details
Skills you'll gain:
Strategic Thinking & Planning
Competitive Advantage & Market Positioning
Strategic Leadership & Decision-Making
Change Management & Organizational Transformation
Duration:
1 Year
IIM Kozhikode
IIMK Advanced Strategic Management Programme
Starts on
Mar 30, 2024
Get Details
Skills you'll gain:
Duration:
22 Weeks
Indian School of Business
SEPO - ISB Venture Capital & Private Equity India
Starts on
undefined
Get Details
Skills you'll gain:
Duration:
12 Months
IIM Kozhikode
Senior Management Programme
Starts on
undefined
Get Details
Skills you'll gain:
Opportunities & Outlining Plans to use AI & ML
Applying Data-Driven Business Innovation Best Practices
Changing Culture to Integrate AI-Enabled Technologies
Ethics, Privacy and Regulations in AI & ML
Duration:
20 Weeks
Indian School of Business
ISB Leadership in AI
Starts on
May 14, 2024
Get Details
Skills you'll gain:
Duration:
18 Weeks
109820388
Strategic Marketing for Leaders: Leveraging AI for Growth
Starts on
undefined
Get Details
Skills you'll gain:
Duration:
12 Months
IIM Kozhikode
SEPO - IIMK CEO Programme India
Starts on
undefined
Get Details
Lower ratio reflects an aggressive build-up of short positions and a cautious near-term outlook from institutional investors, said Sudeep Shah, head, technical and derivative research at SBI Securities.
The ratio has sharply dropped from 36.7% at beginning of July, and from 20.2% at end of previous week, indicated data from SBI Securities. "Global trade tariff-related uncertainty amid fresh tariff threat by US to BRICS members and fresh tariff letters to many countries across the globe, along with muted quarterly numbers are the key reasons behind the recent fall in FIIs'
long-short ratio
," said Vipin Kumar, assistant VP of derivatives and technical research at Globe Capital Market.
The long-short ratio of foreign portfolio investors' bets was between 10% and 20% late last year and early in 2025, when the sentiment was a lot more bearish. Nifty and Sensex, which gained about 13% in over three months, declined nearly 1% each, marking their third straight weekly drop after a weak set of earnings by some banks and IT companies contributed to the weakness.
Nifty ended at 24,968.4 levels on Friday, below the 25,000 mark for the first time since June 23. In July, FPIs have net sold Rs 17,000 crore after buying Rs 7,500 crore in June and Rs 11,770 crore in May.
Last week, Citi downgraded India to 'neutral' from 'overweight', citing elevated valuations and a moderation in earnings growth forecasts. Jefferies' global equity strategist Chris Wood said markets are celebrating the 'AI capital expenditure trade' while ignoring risks from US President Donald Trump's renewed tariff agenda.
While technical charts are pointing to weakness in the stock market in the near-term, an extremely low reading of the long-short ratio is often taken as a signal that the worst is over.
'It's worth noting that historically (6 times since January 2022), whenever the FII longshort ratio drops below the 15% mark, markets often witness a limited downside, as excessive pessimism tends to set the stage for short-covering rallies or a reversal in sentiment,' said Shah.
It will be important for the Nifty to stay above 24,800 for the sentiment to turn positive. 'Nifty's decisive close below 24,800 spot levels will be a negative development that might take it down towards 24,000 spot levels in near term, said Kumar. 'Although that will provide a fresh entry point for swing traders and value buyers,' he said.