Retail Investors Optimistic, FIIs Cautious Ahead of Election Results

Retail and wealthy investors are optimistic about the upcoming election results, making significant long bets on index and stock futures contracts. They expect political continuity, indicating confidence in the market.

On the contrary, foreign institutional investors (FIIs) are exercising caution. They are hedging their bullish positions on single stock futures contracts and cash portfolios by building significant net shorts on index futures.

The stock market has been volatile due to the ongoing election. Investors have been fluctuating between optimism and nervousness as they await the results on June 4th.

Retail and high-net-worth (HNI) investors are particularly bullish, as seen in the marketwide futures open interest, which is at a historic high. They hold substantial net long positions in single stock futures and index futures contracts.

FIIs, however, are more cautious. They hold net long positions in single stock futures but have built net short positions in index futures contracts.

The market sentiment is largely influenced by expectations of the incumbent Bharatiya Janata Party-led National Democratic Alliance’s victory. Investors are hopeful for a significant win, which could lead to a surge in the market.

If the NDA secures a substantial number of seats, the market could reach new highs. However, if the results are not as expected, a correction in the market is anticipated.

India Vix, a measure of market volatility, has increased significantly in May, indicating the uncertainty surrounding the election outcome.

Nifty options expiring around the election results show various resistance and support levels, reflecting the market’s anticipation and potential reactions to different electoral outcomes.

Overall, investors are closely monitoring the election results and adjusting their strategies accordingly to navigate the market volatility.