FIIs show caution with record net shorts ahead of Indian election results

Foreign institutional investors (FIIs) have added record net index shorts in a single session ahead of the announcement of the Lok Sabha poll results on June 4.

According to the exchange data, FIIs, in a dramatic move, raised their net shorts to 2.97 lakh contracts from just 5,000 contracts in a single session on Thursday, May 30.

This was the record addition in net shorts in a single session in the history of the Indian markets.

At the same time, FIIs cut down their long positions to 51,000 contracts from 257,000 contracts, a sharp correction of 80%. The sharp increase in net shorts led to a decline in the FII long-short ratio to 13% from a high of 50% in a single day.

The move reflects the caution exercised by foreign investors ahead of the election results. The last phase of voting in the Lok Sabha polls will be conducted on June 1. The counting of votes and results will be out on June 4.

In market parlance, a high net shorts ratio suggests a positive market sentiment among investors. A low ratio, on the other hand, suggests a negative or bearish sentiment. A low ratio also indicates reduced appetite among investors for buying and holding assets.

Domestic stock markets rebounded to close higher on May 31, Friday, with benchmark indices SENSEX and NIFTY gaining 0.10% and 0.19% respectively.

Market data showed that FIIs were net buyers in Indian markets on May 31 with net value worth ₹2,114 crore.

According to experts, FIIs position in index futures were weak for the June series. Rollovers were also below averages as FIIs decided to stay light ahead of the exit polls and results.

Nifty Futures contract Open Interest started with around 144 lakh vs 124 lakh in May, reports suggested.