FPIs cut bullish Nifty bets on virus surge

MUMBAI: Overseas investors have slashed their bullish derivative bets on India’s main benchmark Nifty as the second wave of Covid-19 across the country has forced them to turn cautious about the country’s near-term prospects. Their net bullish positions in index futures, including the Nifty, have lightened to ₹2,250 crore from ₹9,500 crore on January 8, according to IIFL Securities.

Analysts say foreigners are cutting their short-term trading bets with the outlook for the economy turning uncertain after the virus spreading rapidly and causing record deaths.

“This is a very short-term reaction. They had put in large money before this in the January to March period,” said Rajat Rajgarhia, CEO, Motilal Oswal Institutional Equities. "They are in a wait-and-watch mode as things are also developing on the pandemic front.”


In addition to cutting their bullish bets in Nifty futures, foreign investors have also been offloading shares. In April so far, they have sold shares worth ₹18,000 crore though market participants said there is no rush to the exit door on the belief that this phase too shall pass. Between January and March, they have pumped ₹55,100 crore into equities here.

“There are quite a number of investors who have seen the pandemic turning bad in India. That has led to FPIs taking some money off the table and concentrating in countries where the pandemic is not as bad, but the long-term story hasn't changed," said Andrew Holland, CEO, Avendus Capital Alternate Strategies. "They are concerned about the healthcare infrastructure situation but they have seen second waves in developed countries so they are not viewing it badly," said Holland.

Rajgarhia said many investors are positive on the India beyond the “near-term pandemic impact”. Fitch Ratings also on Thursday said the resurgence of Covid-19 infections may delay India’s economic recovery but will not derail it.

The Sensex is down over 8 per cent from all-time high level of 52,516.76 of February 16 and the Nifty is down 7 per cent from record high of 15,431.75, also hit on February 16. In April so far, India has underperformed most emerging markets.

While foreign investors have turned cautious, retail investors and high net-worth individuals are holding on to their bullish bets.

“In F&O also there is a lot of resilience that is getting displayed at lower levels. Client (retail and high net-worth individuals) category are holding on to long bets in stock futures," said Sriram Velayudhan, vice president alternative research, IIFL Securities. "FIIs are treading with caution. I am not expecting a big drawdown in the remaining part of the April series and 14,250 should hold,” said Sriram.

FPIs bought over ₹2 lakh crore worth of Indian shares in the financial year ended March 31, 2021.

Rajgarhia said if foreign investors see the pandemic easing, flows will return.