Tuesday, August 5, 2025

August F&O Setup: Here’s why low FII longs are a boon for the Nifty 50

Date:

The Nifty 50 index heads into the August F&O series after the July series ended up becoming the first negative one in five. The index declined nearly 800 points during July, making it only the third instance in the last 11 years when the Nifty ended with negative returns in a July series.

F&O Series Returns (Points)
July 2025 -781
June 2025 715
May 2025 587
April 2025 655
March 2025 1,047
February 2025 -705

The setup for the August series promises to be an interesting one. The last four August series has seen the Nifty gain in three of the, with average returns ranging from 3% to 5%.

August Series Year Returns (Points) Returns (%)
2021 859 5.4
2022 593 3.5
2023 -406 -2.1
2024 745 3.1

The Nifty begins the August series with lower rollovers. The 75.7% figure is lower than the three-month average of 79.2%.

Series Rollovers
August 75.7%
July 79.5%
June 79.1%
May 79.1%
April 76.1%

FII exposure at the start of this series is at a multi-year low for the Nifty. The 10% long exposure is the lowest since 2023.

Month FII Longs In Futures
August 10%
July 38%
June 20%
May 41%
April 40%

However, a low FII long exposure is a positive for the Nifty. The last three instances, when the FII exposure had hit similar lows, the Nifty ended up gaining over 2,000 points over the next few series.

Series Long % Nifty Move
April 2023 9 +2,579 Points In Next 4 Series
November 2023 11 +2,921 Points In Next 2 Series
February 2025 11 +2,300 Points In Next 5 Series

On the flip side, clients, or higher networth individuals (HNIs) are 70% long in index futures, a fairly high figure, and suggesting conviction about an upmove on the index. Net long contracts here stand at 1.04 lakh.Among the key triggers in the August series include the global updates around the tariff uncertainties, the policy outcome of the Reserve Bank of India on August 7, which now holds even more significance after Donald Trump’s tariff imposition, remainder of the June quarter earnings season and the beginning of the festive season in the country.

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