FIIs increase short bets in Nifty, index futures; should you be worried?

Business Standard

05-06-2025

Since the start of the June futures & options (F&O) series, foreign institutional investors (FIIs) have increased short positions in index futures, shows the National Stock Exchange (NSE) F&O data. FIIs open interest in index futures in the last four trading sessions has increased by 21.8 per cent since the start of the June series. Among the key future indices - FIIs bets in Nifty futures rose by 26.2 per cent and in Bank Nifty by 32.5 per cent. The NSE F&O data shows, FIIs net sold 17,589 contracts of Nifty futures during this period, and 1,775 contracts of Bank Nifty futures. Overall, FIIs were net sellers of 24,972 contracts of index futures in the last four trading sessions, starting from May 30, 2025 onwards. In the process, FIIs long-short ratio - number of open positions on the buy-side versus sell-side of trade - has dropped to a two month low at 0.21. This ratio now implies that FIIs hold nearly 5 sell-side open positions in index futures for every single long (buy-side) trade. ALSO READ | Nifty chart shows Golden Cross formation; will its 6-year history hold? Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities in a note highlights that Foreign Portfolio Investors (FPIs) have been consistently increasing short positions in the index futures, with the long-short ratio slipping to its lowest reading in over two months — a sign of growing bearish sentiment.
Should you be worried with FIIs short bets?
The NSE data shows, that FIIs command a sizeable 25 per cent share of the index futures as of June 04, 2025. In comparison with domestic institutional investors (DIIs) who hold little more than 18 per cent bets - purely as hedge. Whereas, analysts opine that FIIs other than hedge positions, also tend to take a directional call on the market via F&O bets. Among other participants, retail investors command over 48 per cent share and proprietary traders the balance 8 per cent. Hence, FIIs are said to be a relatively significant player in the F&O segment.
Where is the Nifty headed?
Today will be the first weekly expiry for Nifty futures in the June series. As long as the Nifty sustains above 24,475, there remains scope for minor pullbacks, but a decisive close below this level could open the doors toward 24,300. On the upside, a breakout above 24,850 may trigger short covering and potentially push the Nifty toward the psychological barrier of 25,000, the note from SAMCO Securities read. Options data continues to signal caution. Significant call writing has been observed at near-the-money strikes, while put writers are shifting lower, implying reduced confidence on the bullish side. The 25,000 strike remains the largest open interest on the call side with 1.40 crore contracts, establishing a solid ceiling. On the Put front, the 24,500 level has seen strong additions of 94.34 lakh contracts, reinforcing it as a critical support floor, said Dhupesh Dhameja in the note. Meanwhile, Max Pain is currently positioned at 24,600, suggesting market participants expect expiry to settle around this level, the note stated.