While the May futures and options (F&O) series started with a close in the red for the domestic market on April 25, the rollover of positions, especially those by foreign institutional investors paint a different picture. After hitting multi-year lows, FII long exposure in index futures has rebounded to 41% at the start of the May series, the highest level since October 2024.
That suggests a shift in FII sentiment towards Indian equities, anticipating the market to fare better than other global counterparts, majorly those in the emerging market basket. The optimism among FIIs is largely carried on expectations of India standing at a better spot to navigate through Trump’s tariff tantrums due to its resilient domestic-oriented economy and low export exposure. Meanwhile, the good ties between New Delhi and Washington are also reflected in the latter’s willingness to prioritise the closing of bilateral trade agreements with India before the 90-day tariff relief window closes in July.
Other positive tailwinds such as more attractive valuations following the market downturn since October last year, expectations of stronger corporate earnings in FY26, and easing inflation have also boosted sentiment.
The positive sentiment running across FIIs suggests better times for Indian equities, with the market likely to extend its upward trajectory for a third consecutive time in the May F&O series. “In the new series, the surge in FII long-short indicates a significant shift towards bullish positioning. This sharp rise reflects growing confidence among FIIs in the market’s near-term prospects and adds to the overall positive undertone heading into the May series,” analysts at SBI Securities wrote in a note.
Meanwhile, Devarsh Vakil, Head of Prime Research, HDFC Securities also echoed similar sentiments. Vakil believes that the bullish long-short ratio of FIIs indicates that they began covering their shorts in the April series.
He also highlighted that the May series began with an all-time high open interest (OI) of 1,150 crore shares in the stock futures segment, as against 1,145 crore shares at the beginning of the April series. “The increase in OI coupled with the average gain of 4.8% of the F&O stocks, suggests long build up along with the short covering. Meanwhile, 82% of the total F&O stocks witnessed either long build up or short covering, suggesting positive bias for the May Series also,” Vakil said.
Furthermore, SBI Securities noted that rollover of Nifty Futures rose to 79.08% in the May series, up from 76.09% last month, though marginally below the three-month average of 79.58%. “This indicates improved rollover activity on a month-on-month basis, reflecting cautious optimism among market participants ahead of the May series,” the brokerage said. Market-wide rollover stood at 89% compared to 90% last month, it added.
Not just that, the seasonality trends also work in favour of the May F&O series as the benchmark index has eked out positive returns on 10 occasions, delivering an average gain of 4.66%, while on 7 occasions, it closed in the red with an average loss of 4.45%. Overall, the Nifty has posted an average return of around 1% in the May series, combined by a consistent average volatility of 8.60%.
Key Levels to Watch
Looking ahead, analysts at SBI Securities believe that the 24,050-24,000 zone will act as immediate support for the Nifty 50. “As long as the index is trading above the 24,000 level, it is likely to continue its upward journey and test the level of 24,550, followed by 24,700 in the short term,” the firm stated.
On the downside, however, if the index slips below the level of 24,000, then analysts at the firm see the 23,780-23,750 zone acting as the next crucial support for the index.
