Foreign portfolio investors (FPIs) slashed some of their bearish positions in Nifty and Bank Nifty derivatives, while also turning buyers in the cash market, on hopes of a rebound in Indian equities amid elevated oil prices.
FPIs were net buyers of shares worth a provisional ₹2,813.69 crore on Monday, according to BSE data, helping the market pivot from deep intraday losses to end in the green.
Nifty recovered 333 points from its intraday low of 23,317.10 to close at 23,649.95, up 0.3% from Friday’s close.
Alongside FPI inflows, domestic institutional investors bought shares worth ₹2,682.12 crore, as per provisional exchange figures.
Derivatives shift
The rebound was driven not just by institutional cash buying, but also by FPIs squaring off short index call positions and trimming short hedges in Nifty and Bank Nifty futures on Monday.
FPIs cut short call positions by a sharp 42,153 contracts, taking cumulative net shorts to 214,366 contracts — implying expectations among some of a bounce on Tuesday, which coincides with weekly Nifty expiry, per NSE data.
Additionally, long-term foreign funds reduced their bearish Nifty and Bank Nifty futures positions by 6,641 contracts to a cumulative 209,866 contracts.
On balance, traders sold 134 Nifty puts against 100 Nifty calls expiring Tuesday, up from 97 puts sold against 100 calls on Friday.
The higher proportion of puts sold relative to calls indicates optimism about a rally of at least 1% from Monday’s close, according to NSE data.
Based on NSE options data, Nifty could test 23,800 on Tuesday. A decisive break above this level may extend the rally toward 24,000.
Oil overhang
“Despite oil remaining elevated and recent government measures on precious metals to curb forex outflows, markets staged a smart recovery, which indicates that amid all the negatives, we might be in for a bounce,” said Rajesh Palviya, senior vice president (derivatives & technical), Axis Securities.
Brent crude active futures on the Atlanta-based ICE settled 0.2% higher at $109.53 a barrel amid persistent uncertainty over the fragile ceasefire between Iran and the US.
Elevated oil dragged the rupee down 0.4% to a fresh record low close of 96.36 against the dollar, per Bloomberg data.
Since the war began at the end of February, Brent crude has surged 52%, while the rupee has depreciated 5.9%. Adding to concerns, rising inflationary expectations have lifted the benchmark US 10-year bond yield 16% to 4.6% over the same period.
Rising US yields typically trigger FPI outflows from emerging markets into dollar assets.
Despite these headwinds, analysts expect a bounce in Nifty, which has fallen 6% through Monday since the war began in end of February.
“Technically, the Nifty appears to be forming another consolidation range, with the upside capped in the 23,800–24,000 zone and support placed around the 23,150–23,300 region,” said Ajit Mishra, senior VP (research), Religare Broking.