Foreign investors are easing their bearish stance on Indian index futures amid a cautious weekly rally in the Nifty 50 and Nifty Bank, signalling tentative confidence despite ongoing hesitations in the market.
Foreign investors have eased their bearish stance on Indian index futures, but the latest derivatives data suggests that confidence remains guarded even after a second straight weekly rise in the Nifty 50 and Nifty Bank.
According to the latest market analysis in The Hindu BusinessLine, both benchmarks gained 0.8% last week, extending the recovery that began the previous week. Yet the advance was not forceful, with the indices largely drifting sideways after the earlier rebound. Nifty closed at 24,571 and Nifty Bank at 57,746, while traders appeared reluctant to build large fresh bullish positions.
The shift in positioning was clearer among foreign institutional investors. Their net short exposure in index futures fell 13% to 1.50 lakh contracts, from 1.73 lakh contracts a week earlier, while their net long put positions dropped 9% to 4.14 lakh contracts, signalling less demand for downside protection. At the same time, net short call positions rose 15% to 2.13 lakh contracts, indicating that foreign investors continued to sell calls at higher levels even as they reduced futures shorts. A broader measure combining foreign and retail positioning also became less negative, with net short futures positions shrinking 56% to 19,672 contracts.
That easing comes after a period of much heavier bearish positioning. Moneycontrol reported that foreign investors had kept their index futures shorts near record highs after the Budget, repeatedly capping rebounds as hedges stayed in place. Separate reports from 5paisa and Business Standard described sharp bouts of foreign selling in index futures during earlier sessions, with one note saying foreigners were holding 10 short positions for every long trade. Against that backdrop, the latest reduction in shorts points to a less hostile setup, even if traders are not yet chasing the rally.
Technically, The Hindu BusinessLine said Nifty futures for August rose 0.8% for the week, though open interest fell 5% to 120.5 lakh contracts, a sign of short covering rather than aggressive new buying. The report said a decisive move above 24,750 would be needed to open the way towards 25,000 and then 25,250, while support lies near 24,500 and 24,400. Nifty Bank futures also advanced about 1%, with open interest slipping 2% to 20.8 lakh contracts. The contract spent most of the week between 57,600 and 58,200, and a sustained break above 58,000 could keep the door open to a move towards 60,000, according to the analysis.
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