The reduction in their longs to net shorting of index futures coincides with their selling in the cash market over the past couple of days.
Foreign institutional investors (FIIs) have become net sellers of index futures – Nifty and Bank Nifty – as those with non-corporate structures face a higher tax outgo after the Union budget raised the surcharge on the super-rich.
From being net long index futures on an outstanding basis to the extent of 40,801 contracts on July 4, they have sharply cut their positions to become net short (outstanding) at 15,745 contracts on July 9. Also, the new buyback tax on listed companies, apart from the raised surcharges, has soured the sentiment, said Rohit Srivastava, technical head at Sharekhan by BNP Paribas.
The reduction in their longs to net shorting of index futures coincides with their selling in the cash market over the past couple of days. Nifty futures show open interest having risen with the index correcting from pre-budget higher levels, implying the creation of fresh bearish bets. The July 25 expiry Nifty options’ open interest put call ratio was a provisional 0.87, indicating traders were selling more calls on anticipation that the index would not expire above the level sold plus the premium received, an added negative indicator. This would enable them pocket the premia paid by the call buyers.
