Foreign portfolio investors' derivatives positions continue to reflect caution about Indian equities, with the long-short ratio in Nifty futures standing at 12.95% on Friday, according to The Economic Times. While this represents an improvement from 8.1% two weeks earlier, the reading remains significantly elevated and indicates a lack of strong bullish sentiment. The ratio measures bullish bets relative to bearish ones, with levels above 10% typically signaling caution among institutional investors. Vipin Kumar, AVP-derivatives and technical research at Globe Capital Market, noted that the long-short ratio has improved marginally due to some short covering alongside fresh long additions by FIIs following the US-Iran peace deal, though the benchmark Nifty index has not shown an over-optimistic reaction to the peace deal.
In the cash market, foreign investors demonstrated selective buying behavior, becoming net buyers in four of the five trading sessions last week, purchasing shares worth a net ₹7,778 crore, as reported by The Economic Times. This represents a shift from the previous week's selling pattern, though the buying activity remains concentrated rather than broad-based across the market. Sriram Velayudhan, senior vice president at IIFL Capital Services, explained that while crude has been correcting, levels of $80 are still high, and a dip to $70 or pre-war levels can be a tailwind driving covering from funds that are running short positions in India.
Asian markets have significantly outperformed Indian equities this year, creating additional pressure on foreign investor sentiment toward India. South Korea's Kospi is up 110% in 2026 while Taiwan's Taiex Index has gained 58%, compared with the Nifty's decline of 8.2%, according to The Economic Times. Velayudhan from IIFL Capital Services noted that other regions like South Korea and Taiwan have not yet seen a meaningful reversal or underperformance, making them more attractive to overseas investors.
Several factors continue to influence foreign investor sentiment, including the fragile US-Iran peace deal and currency pressures. Iran said it was once again closing the vital Strait of Hormuz on Saturday over Israeli attacks in Lebanon ahead of weekend negotiations between Washington and Tehran to end the West Asia conflict, underscoring the fragility of the talks, as reported by The Economic Times. Additionally, the rupee's underperformance against the dollar and concerns about higher inflation due to a below-average monsoon forecast remain key concerns for foreign investors.
Market analysts suggest the Nifty continues to trade within a defined range, with positional resistance around the 24,600 level. According to Vipin Kumar, AVP-derivatives and technical research at Globe Capital Market, quoted by The Economic Times, a positive weekly breakout above this level on a closing basis could trigger significant short covering by foreign institutional investors. Kumar noted that a positive weekly breakout in the Nifty index above the 24600 spot level on a closing basis, alongside improvement in the concerned areas, might trigger significant short covering by FIIs. Sriram Velayudhan from IIFL Capital Services noted that while the Nifty has been trading in a broad range of 23,800-24,500, it could test the upper end of that band in the near term.
