FPIs trim short positions, lay ground for a pre-Diwali rise
₹1.69 trillion during March-August also fuelled the rally from the low. They then began unwinding longs and raised bearish bets on cash and index futures, causing the market to plunge from the record high of 20,222.45 to a low of 18,838 on 26 October.
Thereafter, they pruned their negative futures bets on 3 November and on 6 November, which aided the rebound. Data for 7 November was unavailable until press time, but market experts expect the short-covering to continue, fuelling the corrective rally.
Interestingly, they also turned buyers in cash of ₹359.87 crore on 6 November, coinciding with their reduction in futures short positions. They have remained sellers of shares worth ₹42,454 crore from 1 September to 5 November.
“There are many moving parts to FII inflows into EMs, two of them being US bond yields and dollar, which until now were negative for EMs, but have eased after the perceptibly dovish Fed policy on 1 November," said Jyotivardhan Jaipuria, founder of PMS firm Valentis Advisors. “We’d probably see more of them covering their shorts in the derivatives market which along with domestic buying could prop up the markets by another 1.5–2% in the very near term." Agreed Rajesh Palviya, derivatives head at Axis Securities.
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