Futures signal rally may be near peak
Retail, HNIs turn bearish on index futures, a sign of market top
Rich and retail investors have turned bearish on index futures, the first time in nearly three months, indicating stocks trading at record levels may be close to a peak for now, as tensions rise in West Asia.
On Wednesday, when the Nifty kissed a fresh high of 22,775.70 points, retail and high-net-worth individual (HNI) investors initiated cumulative bearish bets on these index futures contracts, showed data from the National Stock Exchange Ltd (NSE), which groups both under the ‘Client’ category. The category turned cumulative net sellers of 16,088 Nifty and Bank Nifty futures contracts, marking a shift 84 days after remaining net buyers of these contracts. Prior to this, the category was net short 53,606 contracts on 16 January.
In recent years, Client positions on index futures have tended to signal a market top or bottom. At the top, their positions get light to negative and near bottom, they raise their bets substantially.
After the client category raised outstanding shorts to 53,606 con
ABOUT-TURN
CLIENT positions on index futures tend to show peak or bottom.
AT the top, their positions get light to negative.
tracts on 16 January, the Nifty fell 4% from 22,032 to a low of 21,137 on 24 January. Similarly, after they raised their outstanding long positions to 113,947 contracts on 30 January, the Nifty rose 5.8% from 21,522 to a high of 22,775.7 on 10 April. Between 17 January and 10 April, Client held the highest net
NEAR bottom, they raise their bets substantially. long position of 113,947 contracts on 30 January, over the period under review.
The shift also signals caution, amid a potential flare-up in West Asia, which could raise energy prices, and the quarterly earnings sea