MUMBAI
:
With barely a fortnight left for the Lok Sabha election results on 4 June, foreign portfolio investors (FPIs) have significantly toned down their bearish sentiment in Indian markets.
On Thursday, they cut their cumulative net short positions on index futures contracts by a whopping 121,415 contracts to 98,351 contracts, from 219,766 a day earlier. Along with their purchase of a provisional ₹4,670.95 crore of shares, this short-covering was a key reason why the markets tested a fresh high of 22993.60 on Thursday.
“Markets don’t fall on pessimism,” Deepak Shenoy, founder of Capitalmind, a Sebi-registered portfolio manager, commented about the short-covering by FPIs. Markets typically fall when there are huge longs in system, and not somanyshorts. Shenoy added that March quarter results had been “really decent” and he expects the market momentum to continue. Aggregate net profit of 1,874 companies grew 26.4% year-on-year to ₹3.74 trillion in the final quarter of FY24.
According to U.R. Bhat, co-founder, Alphaniti Fintech, FPIs had “probably thought it expedient to tone down bearishness ahead of the election outcome, with five phases of polling having concluded.” He expects sharp movements in markets after 1 June when the exit poll results start rolling in.
Momentum to continue
On Friday, markets closed on a flat note, with Nifty down by 0.05% at 22957.10 . Bank Nifty, however, was an outperformer, closing 0.42% higher at 48971.65.
Gautam Duggad, research head – institutional equities at Motilal Oswal believes market momentum would continue as long as “there were no negative surprises on 4 June.”
Rohit Srivastava, founder of IndiaCharts, said that market momentum would hinge on FPIs covering their remaining shorts and initiating fresh longs on the market.
The ones with contra positions to the FPIs on index futures are retail and HNI investors, whose cumulative net long or bullish positions stood at 124,742 contracts.
FPIs have net sold shares worth ₹30,718 crore in the fiscal year through 22 May. They were net buyers of shares worth ₹2.08 trillion.
