Stocks brace for volatile month amid bearish FPIs

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₹14,768 crore in NSE’s cash market in September after buying equities worth ₹1.69 trillion over six straight months. Simultaneously, they held a cumulative net short position in index and single-stock futures as of 29 September, coinciding with their cash market sales. Their cumulative net shorts in index futures (Nifty and Bank Nifty) contracts stood at 72% and in single-stock futures contracts at 53% at the beginning of the October series of derivatives contracts.

Against this, they began the September series with 51% cumulative bullish positions in index futures and 52.8% bearish bets in single-stock futures. Derivative contracts expire on the last Thursday of each month, with a new series starting the following day. If Thursday happens to be a holiday, the contracts expire a day prior.

Unlike at the beginning of the previous series, the difference in the current series is that FPIs are bearish on both cash and derivatives segments. This could increase the volatility in markets in October compared to previous months, analysts said. “In index, FPIs are taking short bets and have increased shorts in SSF (single-stock futures) marginally," said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.

Pagaria said that high-net-worth individuals (HNIs) and small retail investors were counterparties to the foreign institutional investors (FIIs), buying what they were selling in index and single-stock futures and in cash. HNIs and retail investors, described as clients by NSE, hold cumulative net bullish positions of 60% in index futures and a whopping 90% long in single-stock futures. Apart from FPIs, domestic institutional investors (DIIs), including mutual funds (MFs) and insurance companies, are hedging