FII appetite for futures at 6-month high

Exposure at 24% of the gross market position.

The foreign institutional investors' (FIIs') exposure to the derivatives segment "" futures and options "" on the National Stock Exchange, at 24 per cent of the gross market position, is the highest ever in the last six months.

The open interest position has been steadily increasing, as new funds have taken fresh positions in derivatives. Ashok Das, a dealer with IDBI Capital Market Services told Business Standard: "We have to see how much is rolled over at the end of the month," referring to the expiry of the November contracts on the last Thursday of the month.

A roll over in excess of 70 per cent of the outstanding open position would imply that the foreign funds are interested in maintaining their exposure to the Indian equity markets.

However, anything below 70 per cent could give an early indication that the FIIs are preparing to move out, especially since the foreign entities need to close their accounts in the parent countries at the end of December.

Vijay Bhambwani of BSPLIndia.com, a company offering technical trading strategies and advice on derivatives trading, said the foreign investors were known to proceed on annual leave from the second week of December and this could result in a lack-lustre market for sometime. But he added, "I do not see the FIIs deserting the Indian markets overnight."

As on November 17, foreign institutions were net buyers to the tune of Rs 100 crore in the cash segment of the equity markets, and their total open interest in the derivatives segment was Rs 6,360 crore.

At the end of Thursday's trading, the outstanding open interest was over 370 million shares. "Fresh positions were being taken," said Das and the market met with support above the 6,000 level.

Dealers said the increase in open interest could be explained by the fresh positions being taken by new funds. However, during the last three days, volumes had almost stagnated, indicating that old positions were not being closed out. On Thursday, the volumes again registered a significant jump.

The overall ratio of put contracts to call contracts had also gone up sharply, with an addition of contracts amounting to 6 per cent of the outstanding put options and around 4 per cent to call options. All this indicated a bullish trend ahead, said dealers.