Nifty: FPIs’ net shorting of index futures may cap Nifty upside

Increased purchases of shares by FPIs in October and in the month to date have enabled the Nifty to gain 12 per cent to 11895.45 on November 15 from its low of 10637.15 on August 23, but their tone in the market remains decidedly cautious going by their cumulative net shorts in index futures — Nifty and Bank Nifty. FPIs were cumulatively net short index futures by 42158 contracts as on November 15 even as they net purchased shares worth Rs 36,049 crore in the fiscal year to date.

The implication is that though the Nifty remains just 1.7 per cent away from its record high of 12103.05 on June 3, FPIs are exercising caution and this could cap the upside close to its record high in the near term.

The sale in futures is like a hedge to their cash portfolios of blue chips constituting the index. Supports kick in at 11800 and 11600, Nifty puts expiring November 28 show. “It looks like we could be in for a correction, given the net shorts in the index futures that FPIs have taken,” said Rohit Srivastava, founder, IndiaCharts.

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