FIIs Cover Short Bets as Markets Rebound, Yet Stay Wary

Overseas investors reduced bearish derivative bets on India as the market rebounded, liquidating some short positions. The long-short ratio for Nifty futures rose to 22%, signaling cautious optimism, and was close to the 18-21% range seen in the last week of February before the US-Iran clash. The ratio had slipped to 9.9% on March 13 and stayed between 10% and 18% for most of the period of heightened tension, with a lifetime low of 5.98% reached on September 30, 2025. Short covering came as the market posted weekly gains, providing a glimmer of positive momentum amid ongoing geopolitical uncertainties. FPIs bought about ₹672 crore in the cash market on Friday after a streak of selling in March and April, underscoring a tentative shift but not a full reversal in sentiment.

Analysts noted that while the improved long-short ratio reflects short-covering activity, there were few fresh long additions, suggesting that FIIs remain cautious rather than outright bullish. The pace of further reductions in bearish positions will hinge on the progress of US-Iran talks, market earnings, and currency stability. Even with signs of a rebound, the broader narrative remains one of vigilance, as investors weigh global tensions and domestic catalysts. Continued selling in cash markets, punctuated by occasional pauses, is not interpreted as a guaranteed turnaround in sentiment, keeping expectations tempered for the near term.

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