Indian equities could be primed for a sharp short covering rally next week, with data showing that foreign institutional investors (FIIs) have ramped up their bearish bets to extreme levels.
As per NSE data for September 5, FIIs net sold ₹1,305 crore in the cash market, even as domestic institutional investors (DIIs) offset the outflows with net purchases worth ₹1,821 crore. The derivatives segment, however, revealed the bigger picture—FIIs unwound 1,300 long positions in index futures while adding 1,500 fresh shorts, pushing their long-to-short ratio to a strikingly bearish 7:93.
At the index level, the Sensex closed nearly flat at 80,710 (-7 points), while the Nifty 50 edged up 6 points to 24,741. The Bank Nifty gained 39 points to 54,114, and the Nifty Midcap 100 outperformed with a 116-point rise.
Market watchers say such extreme positioning by FIIs has historically set the stage for powerful short covering rallies. “Every time FII shorts have risen to record highs, Nifty has surged over 2,000 points across the following 3–4 series,” said a dealer tracking derivatives positioning.
Adding to the bullish case, recent comments by US President Donald Trump and Prime Minister Narendra Modi have lifted sentiment, with traders expecting supportive global cues to fuel risk appetite.
If history is any guide, September 8 could well mark the beginning of a sharp rebound, led by unwinding of FII short positions in index futures.
