The Hindu Business Line : FIIs' open positions in derivatives segment hit record 42%

FOREIGN institutional investors' investments in the derivatives markets have gone up sharply with their total gross market positions crossing over 40 per cent.

This is substantially higher than the average positions of around 30-32 per cent earlier this month.

According to NSE data, at the end trading on April 28 (the day of expiry of derivatives contracts), FIIs total gross market positions was 42.06 per cent.

According to derivatives analysts, this is substantially higher than what has been the position in the previous months.

Brokers said the high market positions by FIIs means that their investment decisions in the derivatives market would also influence both the cash and derivatives segments. Till now FIIs investment decision in the cash market had moved the market in either directions.

FIIs would have increased their positions in absolute terms and due to this their gross market positions have gone up, said market players.

A look at the FIIs investment pattern of last week shows that their open interest in the Index Futures segment increased from 1,93,990 contracts as on April 25 to 2,54,485 contracts on April 28 (the last day of derivatives expiry).

During the same period, however, the open interest in stock futures declined. The open interest declined from 2,46,193 contracts to 2,07,589 contracts.

Some analysts believe that the high derivatives positions for FIIs could be due to other market players not rolling over their April positions.

"When the existing positions are not rolled over by other market players, the total market positions of FIIs in percentage terms would go up even if they (FIIs) have not increased positions in absolute terms," said a derivatives analyst with a foreign broking firm.

He said the overall mood in the market is uncertain and in such conditions investors will not be active in the derivatives segment.

A top official of a foreign broking firm catering to several FIIs said, "They (FIIs) are going short in the derivatives segment and this is the main reason for the increase in Index Futures open interest and drop in stock futures. This way they are hedging their positions in the cash segment."

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FIIs' open positions in derivatives segment hit record 42%