Whilst the FII buying in cash in equities is well documented, here’s a look at what they have been doing in stock futures
The media always highlights the cash buying of FII’s but if you see the charts below you will note quickly that bottoms and tops on the monthly time frame are caused when FII’s are aggressively selling stock futures near the top and covering them at the lows ( stock futures net are seldom positive)
Table 1 is for stock futures holding from Feb 2103 to June 2013
Table 2 is for stock futures holding from July 2103 to Nov 2013
And the last table above is for Dec , Jan and Feb’14.
In the table above we have the dates , stock futures and the Nifty closing price in 3 columns.
The stock futures are net and calculated as the difference between stock longs and shorts in futures.
The highest level seen in the Nifty for the month is highlighted in green and the red is the lowest value of the month
Since stock futures are net negative everymonth the highest value of the negative scale is in red and green is the lowest negative.
The chart will show you
a) That Fii’s are between 3,00,000 to 6,00,000 contracts short in Stock futures every month to cover up the cash buying
b) In most cases when Nifty is at month highs the stock future shorts are at the highest level
c) RM pointed out to us that in August of last year when Nifty was making the lows at 5100- 5200, the stock futures were at net 8908 contracts only, which means that they had covered all the stock future shorts at those swing lows.
d) Since August they have rebuilt the book to about 400,000 contracts short in stock futures as of end of last feb.
Final Point- Don’t get carried away by cash buy figures of FII’s. They are always hedged.