These market constituents, who have been absorbing foreign investor outflows from India, have significant bullish positions open on Nifty and Bank Nifty derivatives, besides being net buyers on the cash segment, shows exchange data.
The Gift Nifty futures contract, the erstwhile SGX Nifty, traded by foreign investors well after the National Stock Exchange and BSE Ltd shut at 3:30 pm on Friday, signals a 560-point or 2.4% drop when the Nifty opens on Monday.
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The contract closed at 22,343.5 early Saturday morning–trading runs for over 19 hours as opposed to the normal six hours fifteen minutes on NSE and BSE–in response to a global stock meltdown.
Global stock indices such as Dow and Nasdaq tanked by almost 6% on Friday on growing fears of a recession in the world’s largest economy over the next 12 months as President Donald Trump imposed reciprocal tariffs on the US’ trading partners last week.
The Nifty closed 1.5% down at 22,904.45 on Friday before the US markets opened. But the Gift Nifty took cues from weaker US and European markets, closing 2.68% lower early on Saturday. This sets the stage for a weak opening by Indian stocks, piling the pressure on bullish retail investors.
“The retail/HNI category could suffer serious losses if the market plunges as much as that indicated by the Gift Nifty,” said Rohit Srivastava, founder of IndiaCharts.
Retail and HNIs, designated “client” by NSE, are among the chief participants on the markets. Others include domestic institutional investors (DIIs), foreign portfolio investors (FPIs) and proprietary traders.
Retail, who trade directly on NSE against mutual fund investors, net purchased shares worth ₹1.4 trillion last fiscal year (FY25) through February, per exchange data. The trend for March was not available as of press time. Against this, FPIs net sold shares worth ₹1.27 trillion in the whole fiscal, per NSDL.
Besides this, their net cumulative open or outstanding positions on Nifty and Bank Nifty futures stood at 40,514 contracts. On Nifty and Bank Nifty index puts, they were net short by 410,515 contracts. To be sure, they were net short on index calls by a much lesser 197,468 contracts. But this would be scant as a hedge against their bullish positions in cash and on puts.
Their counterparties, FPIs, were cumulatively net short on futures by 86,592 contracts and long index puts by 355,447 contracts as of Friday, besides being net sellers in the cash market of ₹1.27 trillion in FY25 and ₹10,355 crore this fiscal (FY26).
“We have been in a corrective phase, interspersed by the odd bounce in the market since late September last year,” said Sahaj Agrawal, senior VP (derivatives research), Kotak Securities. “The fall currently underway could extend to the 4 March low (21964.60) in due course amid the persisting uncertainty in global financial markets.”
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Nifty rose 20% from an election day low of 21,884.50 on 4 June last year to a record high of 26,277.35 on 27 September on political and economic continuity hopes after NDA won a third term in office. However, fears of a global tariff war, thereafter, pushed up US bond yields, sparking FPI outflows from India, causing a 16% fall from the highs to a low of 21,964.6 on 4 March.
From here, the market technically retraced to a high of 23,869.6 last month but has fallen since then in line with global markets to Friday’s 22,904.45, breaching key supports and paving the way for sustained volatility on tariff tensions.
To be sure, options traders on Friday have baked in a lower 2% range for the index for the coming week. This implies Nifty will trade within 22,662 -23,138 from Friday’s closing level.
If this range breaks on Monday, they will be forced to cover their puts by buying them back, adding pressure to the downside.
Leveraged stocks
Some retail investors have leveraged themselves significantly by borrowing funds from brokers at a small cost to buy shares under the margin trading facility approved by exchanges. The leverage can be up to four times.
Top stocks purchased under this facility include Jio Financial Services Ltd, with a total of ₹1,319.44 crore financed by broking members of NSE and BSE as of 3 April. For State Bank of India, the total under margin trade financing stands at ₹550 crore, ₹1,261 crore for Tata Motors Ltd and ₹1,324 crore for Reliance Industries Ltd.
Generally, stocks funded by margin are sold by brokers if investors can’t top up margins amid a steep cut. The total margin financing by brokers stood at ₹68,908 crore as of 3 April, per NSE data.
