Synopsis
Foreign investors reduced their bearish derivatives bets on India to their lowest level since the West Asia conflict, as a market rebound led to liquidations of short positions. The long-to-short ratio of Nifty futures increased to 22%, indicating cautious optimism. Further changes depend on US-Iran negotiations, outcomes and monetary stability.
ETMarkets.comBearish derivatives bets on India by foreign investors fell to their lowest level since the West Asia conflict, as the market rebound after the two-week ceasefire prompted them to liquidate some of their short positions.
The long-short ratio – the proportion of bullish (long) and bearish (short) positions – of foreign portfolio investors’ Clever futures betting reached 22% on Friday, close to the 18-21% range seen in the last week of February before the US-Iran standoff began on February 28.
The figure had fallen to 9.9% by March 13 and remained between 10% and 18% for most of the fighting period as these investors increased the hedges of their portfolios. The ratio had reached a lifetime low of 5.98% as of September 30, 2025.
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The short covering came amid Nifty’s weekly gains of 5.9% through Friday, when it ended at 24,050.6, its highest closing level in a month.
“FIIs have started covering short positions in the derivatives segment over the past few days, signaling early reversal signals,” said Nilesh Jain, head of technical and derivatives research at Centrum Finverse. “Friday’s return to buying in the spot market after several sessions is a positive development and could support a further pullback alongside continued short covering.”
FPIs were buyers to the tune of ₹672 crore in the cash market on Friday, after remaining sellers in all trading sessions in March and April so far. Further reductions in bearish positions will depend on the progress of negotiations between the United States and Iran, which began on a sour note over the weekend. “Although the long/short ratio has improved due to short covering, we are not seeing many new long additions, suggesting that FIIs remain cautious rather than bullish,” said Siddharth Bhamre, head of institutional research at Mehtaic Acid.
“Continued selling in spot markets with a one-day break is not a sign of a turnaround in sentiment.” Since late September 2024, when the downward trend in Indian stocks began, the long-to-short ratio of FPIs’ Nifty futures positions has mostly remained between 10% and 20%, indicating predominantly bearish bets. Before the slide began, the figure was 81%.
Somil Mehta, head of retail research at Mirae Asset Sharekhan, said the change in the ratio has yet to show that foreigners have returned to their bullish habits. “A lasting improvement in their sentiment will depend on the stability of global factors such as crude oil price And geopolitical developments”, he said. The rise in corporate profits in the fourth quarter will be one of the factors that will prompt foreigners to review their position on Indian stocks.
“If earnings remain under pressure, valuations may not be attractive to foreign investors. They will likely also wait for stability in the Indian currency,” Bhamre said.
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