12
Foreign portfolio investors (FPIs) are turning bearish on the Indian stock market after the Union budget.
They have sold shares worth Rs 2,000 crore in the four sessions after the budget on July 5, while an indicator of their positions in index futures including Nifty shows a build-up of bearish bets in four-and-a-half months.
An increase in tax outgo for foreigners, absence of a boost for the economy and continued crisis in the non-banking finance space may have prompted them to turn skittish about the prospects of Indian stocks.
Foreign investors’ long-short ratio in index futures is at 47 per cent — the lowest since February.
This ratio is a measure of bullish positions compared to bearish ones.
When the ratio is high, it means sentiment is bullish.
FPIs are said to be net long if this ratio is above 50 per cent.
“The long short ratio is near 47.
It is the lowest since February 26 this year,” said Jay Purohit, technical and derivative analyst at Centrum Broking.
“Bearish positions of FIIs are intact, there is formation of lower top lower bottom on daily time scale and the index is likely to face fresh strong hurdle near 11,630-11,650,” said Purohit.
Nifty snapped its four-session losing streak on Thursday and ended up 84 points or 0.7 per cent at 11,582.90.
Sensex ended up 266.07 points or 0.7 per cent at 38,823.11.
“The market was oversold and a bounce was expected.
The index may gain another 70-80 points but fresh selling is likely to come after that and the index may go to 11300,” said Purohit.
Brokers said the foreign institutional selling in the last four sessions has not been heavy but concerns over higher taxes have kept these investors on the edge.
The tax on foreign funds earning more than Rs 5 crore in a year and structured as Association of Persons (AOPs) or trusts will rise from 35.8 per cent to 42.7 per cent.
The rate will increase from 35.8 per cent to 39 per cent if the fund earns between Rs 2 crore and Rs 5 crore in a year.
The long-term capital gains tax on FPIs in these structures will go up from 12 per cent to 14.25 per cent, while the short-term capital gains rate would rise from 18 per cent to 21.4 per cent.
The highest number of open positions in the Nifty index put options is at 11,300.
The 12,000 strike holds the highest concentration of positions among Nifty call options.
Markets were lacklustre in the run up to the budget amid concerns over liquidity crisis in the NBFC space and growing instances of corporate governance issues, among other factors.
Data released at the end of May showed India's GDP grew 5.8 per cent in the January-March quarter, a five year low.
Including losses on budget day, the Nifty has fallen 3 per cent.
Investors were hoping that the government would give markets a road map for economic revival in the budget.
While the lower fiscal deficit target came as a relief, the prospect of minimum public shareholding limit being increased to 35 per cent from 25 per cent led to market participants fretting about Rs 4 lakh crore worth of equity supply hitting Dalal Street in the coming years.
With short positions by foreign investors intact, the market is unlikely to move up significantly in the short term.
“There was minor buying on Wednesday but overall in the series, short positions are intact.
The market is likely to face hurdles between 11,600 and 11,700,” said Sneha Seth, derivative analyst at Angel Broking.
Stock Market
FPIs turning bearish, markets unlikely to gain big in short term
Download Android App
Share in 
FullScreen CheckVideos
| Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021 |
Buy Our Merchandise (Peace Series)
- Details
- Category: Stock Market
21