2 hrs ago
Foreign Investors Cut Bank Nifty Shorts Ahead of RBI Policy
Foreign investors had bet that bank shares might fall, but they have recently reduced some of those bets.
This is called covering short positions, and it can help prices rise when investors buy back what they sold.
The Reserve Bank of India was expected to raise its key lending rate by a small amount on Wednesday.
Investors had mostly expected this move already, so they were watching for anything surprising.
Bank shares had fallen earlier but then began to recover.
Experts said improving credit growth and available funds could help banks.
They also said the outlook could change if the RBI decision surprises markets or international tensions worsen.
The article says investors were also reducing short positions in broader stock index futures.
Foreign portfolio investors reduced their net short positions in Bank Nifty futures from ₹1,980 crore on September 25 to ₹1,074 crore on October 5.
The RBI was widely expected to raise the repo rate by 25 basis points to 5.50% while keeping its policy stance neutral.
Bank Nifty recovered after falling 6% from September 7 to September 29, rising to 55,271 by Tuesday.
Analysts cited oversold conditions, improving credit growth and comfortable bank liquidity as possible supports for further gains.
Market participants warned that an unexpected policy outcome or an escalation in Middle East tensions could undermine the positive outlook.
- Who
- Foreign portfolio investors, banking analysts and market participants.
- What
- FPIs reduced short positions in Bank Nifty futures ahead of the RBI policy decision.
- Where
- Indian markets, including Bank Nifty futures traded on the National Stock Exchange.
- When
- The policy decision was expected on Wednesday; position data compared September 25 with October 5.
- Why
- Investors were positioning ahead of the expected rate hike, while improving credit growth and liquidity supported hopes for bank shares.
Reasons for a Potential Rally
Risks to the Outlook
Bank-share prospects
Reasons for a Potential Rally
Analysts and investment managers cited short covering, improving credit growth, oversold conditions and comfortable liquidity as supports for banks.
Risks to the Outlook
They cautioned that an unexpected RBI decision or a sudden escalation in Middle East tensions could weaken the outlook.
Key facts
- Expected repo rate move
- A 25-basis-point increase to 5.50%
- Expected policy stance
- Neutral
- FPI Bank Nifty net shorts
- Declined from ₹1,980 crore on September 25 to ₹1,074 crore on October 5
- Cumulative index futures net shorts
- ₹54,444 crore on October 5, down from ₹62,706 crore on September 25
- Bank Nifty level
- 55,271 on Tuesday, after rising 0.6% that day
- FPI Indian equity assets
- ₹66.17 trillion at the end of September
- FPI financial-services holdings
- ₹20 trillion, or about 30% of their Indian equity assets
Quotes
Swarup Mohanty
Vice chairman and chief executive officer of Mirae Asset Investment Managers (India) Pvt. Ltd.
“So long as there are no negative surprises on the rate and stance perspectives, domestic buying complemented with further FPI short covering should be a positive. Thanks to FCNR(B) deposits of $127 billion, banks are flush with funds at a time credit growth has begun to pick up.”
livemint.com
“We are positive on banks and expect no negative surprises from the MPC meeting.”
livemint.com
Sources
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