Nifty 50 crosses 20,000 mark despite FII selling

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On September 11, 2023, the Nifty 50 index crossed the 20,000 mark for the first time, despite foreign institutional investors (FIIs) selling Rs 8,800 crore worth of equities in the cash market in the same month.

According to experts, the bullishness in the market may be partly due to inflows from domestic institutional investors and increased activity in Nifty contracts on the first lone weekly expiry (September 7).

On September 7, Nifty contracts saw higher action as Bank Nifty weekly contracts expired on Wednesday, per the new routine. On that day, over 32.75 crore Nifty option contracts were traded compared to 17.62 crore contracts on August 31, which was a monthly expiry and generally attracts higher activity.

Traders may have rediverted capital to Nifty once Bank Nifty was settled on Wednesday. With broader markets breaking out, traders started looking at Nifty too.

It is too premature to say if Nifty’s sole expiry had any significant impact on cash market. However, traders can take advantage of the increased volatility in a single contract.

The Nifty 50 was in a range of 19,200 to 19,600 from August 3 to September 4. On September 7, Nifty opened near 19,600, made a low of 19,550 and then rallied higher and took out 19,650. This is when short covering started and several stop losses were triggered.

Currently, the net long FII position in index futures stands at 35,066 contracts compared to 7,381 contracts a week back, indicating a 4.7x jump.

Going ahead, the consensus view is optimism on India’s growth prospects in a low-growth world. Despite the dollar index hovering near 105-mark and the U.S. 10-year yield at 4.29 percent, FIIs do not want to miss out on the India party – even if it means going long on the index.

In summary, the Nifty 50 crossed the 20,000 mark on September 11 despite FII selling due to a combination of factors, including inflows from domestic institutional investors, increased activity in Nifty contracts on the first lone weekly expiry, and short covering. The consensus view is optimism on India’s growth prospects, which is attracting FIIs to the market.


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