FII sales in derivatives at a 2-month high

Foreign investors have been net sellers in the last 10 trading sessions

Foreign institutional investors (FII) have been net sellers in the derivatives segment for the last 10 trading sessions. In fact, FIIs' net sales in the derivatives segment have been the highest in the last two months.

Traditionally, FIIs have been net buyers in the cash segment of the equity market and they would hedge their positions in the derivatives segment.

However, this trend has changed in the last fortnight, market sources said.

Rather than rolling over their positions to the next-month series or allowing it to expire at the end of the month, FIIs have been squaring off their positions, these sources added.

Vijay Bhambhawani of Bslpindia.com said, "This is a kind of a end-of-the-account scenario and one can expect some profit booking to take place."

The FIIs' trading pattern shows that they have concentrated their selling in index futures and stock futures. FIIs have sold stock futures worth Rs 676 crore in the last nine trading sessions to March 23 even as the open interest has increased by Rs 484 crore.

In the index futures segment also FIIs have been net sellers on all nine trading days except for March 21. Open interest has increased from Rs 2,774 crore to Rs 3,389 crore in this period even as FIIs have made net sales of Rs 1,442 crore in index futures.

The ratio of put contracts to call contracts (the put-call ratio) has now gone up to 0.55 and the put-call ratio in Nifty contracts has gone up to 1.14. This means that the market is in an oversold condition, market sources said.

Ashoke Das, dealing with derivatives in IDBI Capital Markets, said, "The rollover is currently close to 20 per cent, which is not very good, but better than the average recently."

Usually round about this time of the month, there is a bit of unwinding but this time investors have been taking long positions in the March series as well, which shows that they are taking a very limited view.

One reason for the selloff in the cash segment has been margin call requirements as brokers have been pressing their clients to pay up the margins.

This has resulted in high net-worth customers liquidating their holdings resulting in sellings across-the-board.

Bhambhawani made it clear that the transactions in the derivatives segment would have only a minor impact on the cash segment in terms of sentiment, but once the new series starts, on April 1, the cloud of uncertainty would clear up.

The put-call ratio is an indication of this, he said.