FPIs raise bearish bets, to keenly eye budget, Fed meet

livemint.com:

MUMBAI : Foreign portfolio investors (FPIs), whose assets under custody in India stand at $758.4 billion, have closed out bullish positions and created huge bearish positions on index futures (Nifty and Bank Nifty) contracts ahead of a key meeting of the US monetary policy body, or FOMC (federal open market committee), on 30 and 31 January, and India’s interim budget on 1 February. Against a cumulative net bullish position of 81,357 contracts at the beginning of the month, FPIs held a cumulative bearish 108,883 contracts as of 25 January.

FPIs have also sold cash shares of ₹24,734 crore so far this month, after net buying shares worth ₹1.7 trillion in calendar year 2023. These bearish bets are being seen as hedges against anticipated volatility following the two events mentioned above.

“Any cue by the Fed on future rate cuts, and the FM’s statements on the slowdown in consumer expenditure and fiscal glide path, will be closely watched," said Rohit Srivastava, founder, IndiaCharts. Chandan Taparia, senior vice-president, Motilal Oswal Financial Services, said: “Both the Fed’s stance and the fiscal deficit back home are risks to markets as FPIs’ actions will be based on how these events pan out." Based on the FPIs’ hedges, Taparia expects the Nifty to trade in the 20,800–21,800 range, and Srivastava expects it to be in the 20,800–21,700 range in the near term.

Srivastava cited the negative 175,698 contracts FPIs held as recently as 2 November as possibility of further bearish build-up and, consequently, sharper correction in markets. Already, Nifty has corrected 3.5% from a record high of 22,124.15 on 16 January to 21,352.60 last Thursday, led by FPI selling in banks, IT, and consumer companies.