Unsure about the outcome of the US presidential election and concerns over its impact on the markets, foreign portfolio investors (FPIs) have increased bearish bets in Indian equities even as they continue to aggressively sell in the cash market.
Compared to 336,000 net long contracts at the beginning of October series, FPIs have started the November series with 153,000 net short contracts in the index futures. On November 4, they further raised the net short positions to 161,000 contracts.
In the options segment, the story is similar. FPIs hold nearly 700,000 put options contracts and 400,000 call option contracts, the data showed. If put options are held, the investor is hedging against potential losses or speculating losses in the market.
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“Generally, year ends are not synonymous with big events. However, it will be different this November. Events beginning with the US election, FOMC meeting and Maharashtra state elections will likely have a bearing on the markets,” said Sriram Velayudhan, senior vice president of alternative research, IIFL Securities.
The US election, scheduled to be held on November 5, is by far the most crucial event being watched by investors globally, market participants said.
The uncertainty over US elections coincides with FPIs recording their largest-ever monthly sell-off in India in October at $10.9 billion (approximately Rs 91,934 crore).
Concerns over high valuations, slowing earnings growth, renewed interest in China and geopolitical risks have all contributed to a negative sentiment among FPIs.
Osho Krishan, senior analyst – technical and derivatives at Angel One, believes a fall below 23,900-23,800 for Nifty could mean further losses for market, dragging the index down to 23,500-23,400 levels.
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“From a technical point of view, the benchmark index has shown signs of a consolidation breakdown and a similar move in a follow-up session could be devastating in the short term,” Krishan said.
Despite the aggressive selling, domestic equities have not seen a significant fall thanks to continued inflows from domestic institutional investors.
“FPIs have recently recorded the highest monthly outflows,
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