Extremely High FII Short Positions: Foreign Institutional Investors (FIIs) currently went into the expiry day with long to short ratio of just 14% to 86%. This is highest proportion of FII shorts since March 2025.
Such a high short bias typically reflects extreme pessimism. Some amount of short covering (a purchase to close out the initial sell transaction) was inevitable.
Turnaround Signal from Nifty PCR: The Nifty Put-Call Ratio (PCR) had dipped to 0.6 times a few sessions ago. It was 0.7 going into the expiry day. A low PCR signals that traders were heavily positioned in puts relative to calls, indicating an oversold market.
Essentially, a put call ratio of less than one indicates a bullish sentiment in the market. And, if it’s more than one, the sentiment is said to be bearish.
Historically, when the PCR reaches such low values, it often precedes a recovery as excessive bearishness unwinds and market participants reposition for a potential bounce.
After clocking the sharpest intraday fall in over three years, the rupee recovered 14 paise from its all-time low by 3 pm on July 31.
However, it’s important to note that the blue-chip index gave up bulk of the gains in the final hour and a half of trade. The Nifty 50 was down nearly 200 points from the day’s high by end of trade on Thursday.
