The derivatives market witnessed significant action on March 20, 2025, with Foreign Institutional Investors (FIIs) actively adjusting their positions. A key highlight was their increased buying in the cash market and a notable covering of short positions in index futures. This shift could indicate a change in sentiment, but the broader positioning remains cautious.
FII Activity in Index Futures
FIIs made the following moves in index futures on March 20:
Added 6.8k long contracts – Suggesting some fresh bullish bets
Covered 10.5k short contracts – Indicating short unwinding, a sign that FIIs might be reducing their bearish stance
Despite this activity, the overall FII positioning still reflects a bearish bias:
Long:Short ratio stands at 30:70, meaning FIIs still hold a significantly higher number of short positions compared to longs Net Shorts are at 1.1 lakh contracts, signaling that the broader outlook remains cautious
Client Positioning: Longs Halved
Retail and domestic clients, who were significantly net long in the past, have now reduced their bullish bets:Client net long positions stand at 72k contracts
This is nearly half of what it was a week ago, indicating that retail traders are turning cautious or booking profits.Short covering by FIIs typically suggests a potential pause or reversal in the bearish trend, especially if accompanied by cash market buying.However, net short positions remain high, meaning FIIs are still positioned defensively
Client long reduction indicates that retail traders are not as bullish as before, which could mean increased market volatility ahead
The data from March 20 suggests that while FIIs have covered some shorts and added longs, they still maintain a bearish stance overall. Meanwhile, clients cutting down on long positions reflects shifting sentiment. Traders should watch upcoming sessions for further clues on market direction, as sustained short covering could signal the beginning of a trend reversal.
Disclaimer:
The information provided in this article is for informational and educational purposes only and should not be considered as financial or investment advice. Stock market investments are subject to risks, and past performance does not guarantee future results. Readers are advised to conduct their own research, assess their risk tolerance, and consult with a professional financial advisor before making any investment decisions. The author and the website hold no responsibility for any financial losses incurred based on the information provided.