FPIS' bear flip could maul markets more

Volatility likely to stay as FPIs seen increasing short positions

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Foreign portfolio investors (FPIs) have flipped their bullish derivatives bets to bearish ones over just two trading sessions. This swift change of view raises fears of a deeper retracement from the markets' recent peak. In these past two sessions, FIls sold ₹20,384.2 crore of cash shares, turning net sellers of ₹3,852 crore so far this month.

The National Stock Exchange's Nifty marked a life high of 22,124.15 points on Tuesday, when FPIs held a cumulative net bullish position of 79,599 contracts in index futures (Nifty and Bank Nifty). However, they unwound all their bullish bets and turned net short by 4,659 contracts on Thursday, coinciding with the market pulling back almost 3% from the high to close at 21,462.25, thanks to a bloodbath in HDFC Bank Ltd shares.

A pullback or retracement is defined as a fall of 5% from the peak; a correction is a slide of 10-20%. A bear market happens when prices fall below 20% from the peak.