Markets track FPIs’ derivatives activity
Collectively, FPI activity has catapulted the benchmark Nifty 2,157 points, from 15,183 on 17 June to 17,340 on Monday. Market experts are monitoring the trend to see if it sustains and potentially give more legs to the recent rally, which many analysts categorise as a bear market.
MUMBAI : Foreign portfolio investors (FPIs) have not only turned net buyers of Indian shares for the first time in nine months, but have also raised bullish bets on index derivatives for the first time since mid-June, boosting market sentiments.
Collectively, FPI activity has catapulted the benchmark Nifty 2,157 points, from 15,183 on 17 June to 17,340 on Monday. Market experts are monitoring the trend to see if it sustains and potentially give more legs to the recent rally, which many analysts categorise as a bear market.
FPIs bought shares worth ₹6,459 crore in July. In the last nine months, they sold shares worth ₹2.56 trillion.
Besides cash market buying, FPIs also cut cumulative bearish bets on index futures, Nifty and Bank Nifty, from 146,604 contracts on June 16—highest shorting since the onset of the pandemic—to become cumulative net buyers of 17,117 contracts on 28 July, and 27,167 contracts on 29 July.
“We are watching whether this trend of buying index futures sustains or fizzles out as it did in March and May," said Rohit Srivastava, market strategist, IndiaCharts.
Simultaneous purchases in the cash market and on index futures contracts signal bullish sentiments of FPIs who wager that US Federal Reserve will be less aggressive with monetary tightening amid the lowering inflationary expectations. This coupled with the fact that the RBI’s rate-setting committee may turn less hawkish amid cooling crude and other commodity prices is “raising the risk-on sentiments," said Siddarth Bhamre , research head, Religare Broking.
According to Madan Sabnavis, chief economist at Bank of Baroda, a 25 bps hike by RBI will take the repo rate to pre-covid level of 5.15% from 4.9% amid lower inflation expectations.
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