REITs: Addition of shorts by REITs in index futures could dampen Nifty’s rise

Mumbai: Foreign fund managers once again built short positions in Indian markets, having sold net index futures contracts worth ₹6,093 crore on Friday amid a rise of 64,238 contracts in the open position.

The index futures long-short ratio – a measure of market sentiment – ​​of foreign investors’ positions plunged to a two-month low of 19%, which could make for a tough ride in the week ahead. , analysts said.

The long-short ratio plunged from 76% on Tuesday to 37% on Thursday and 19% on Friday, showing that REITs suddenly turned bearish in the Indian market with a short position of 81%.

“The short accumulation of REITs in the indices and equity futures segments, a drop in their net long/short ratio in index futures and selling calls at levels of 17,700 to 17,800 imply that the Nifty may stay sideways and trade in a range of 17,300 to 17,700 levels in the coming days,” said analyst Siddharth Deshpande,

Securities. “Therefore, our advice is to create long positions on the downside with a stop loss of 17,200 and on the upside create short positions near 17,700 with a stop loss at 17,800.”

Current month nifty futures closed with a premium of 23.3 on Friday versus a premium of 118.1 points to its position the previous week. Next month’s future is trading at a premium of 78.65 points.

“The FII’s long-short ratio falls from higher areas with higher volatility making it difficult to race,” Chandan said.

, technical analyst, . “Thus, the main outlook remains bearish, negativity in the ratio could indicate an oversold scenario.” The put-call ratio fell from 0.88 to 1.04. The annualized cost of carry is positive at 1.73%. Open interest in Nifty Futures rose 21.77% After being consistent sellers of Indian stocks for nine months, due to rising interest rates, inflation, heightened volatility and rising crude prices, REITs became net buyers in July. They bought shares worth ₹6,720 crore in July and ₹54,000 crore in August, expecting the Indian economy and markets to outperform US and other markets. However, on September 1 and 2, they sold shares worth ₹2,300 crore.

On the fundamental front, India is better positioned for REITs among emerging markets, analysts said.

“On a relative basis, India looks better positioned with a healthy economic recovery, however, rising energy prices have negative implications, and the Indian economy remains vulnerable from this perspective with respect to the inflation, current account deficit, corporate profitability and currency,” said Arun Agarwal, analyst at Kotak Securities.

“In addition, there are downside risks to global demand.”

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