Nifty Stares at Volatile September as FIIs Roll Over Bearish Bets

After two consecutive futures and options (F&O) series of losses, the Nifty now looks set for another turbulent month, with rollovers to the September series pointing to a deepening bearish tilt among foreign institutional investors (FIIs). Mirroring the market’s poor run, FIIs extended their selling streak for a second straight month, offloading Indian equities worth $3 billion in August.

Adding to their negative stance, FIIs also carried forward heavier short positions into the September series. Their net shorts stood at 169,000 contracts, compared with 138,000 short contracts at the start of the August series.

Data from SBI Securities further showed the FII long-short ratio sliding to 8.24% in the new series. “Since July 11, the ratio has consistently remained below the 20% mark, marking the longest stretch in recent history where FIIs have held a predominantly short positioning,” SBI Securities noted. “This sustained bearish bias underlines the cautious approach of overseas investors amid persistent global uncertainties and domestic market volatility.”

The August F&O series reflected a tug-of-war between local optimism and international headwinds. “Globally, fresh US tariffs on Indian goods, followed later in the month by an additional 25% levy rekindled trade tensions and triggered risk-off sentiment. Domestically, the government’s mid-month GST revision proposal briefly injected momentum, sending auto stocks soaring 5–15% in just two sessions and sparking a rally across sectors. However, this rebound quickly fizzled out under the weight of FII selling and profit-booking,” analysts at Nuvama Alternative and Quantitative Research observed.

Looking ahead, the September series appears more likely to be driven by developments on the global trade front. “The current setup suggests caution, with markets expected to stay range-bound, presenting opportunities for both bulls and bears,” Nuvama wrote in a note. Seasonality also offers little comfort as historically, September has been one of the softer months for Indian equities, with the Nifty closing lower nearly 60% of the time over the past decade and delivering an average return of –0.4%.

As for rollovers, Nifty futures stood at 84%, significantly higher than the 74% average of the past three series, according to Nuvama. SBI Securities added that the rollover cost for the September F&O series edged up to 0.63%, above the three-month average of 0.43%, suggesting participants were willing to pay a premium to carry positions forward. On a market-wide basis, rollovers came in at 92%, slightly above the three-month average of 90%, while stock futures rollovers were at 94%, compared with the 92% average of the last three series.

Key Levels To Watch

Against this backdrop of global unease, analysts widely expect a volatile September for the Nifty. The 24,400–24,300 zone has repeatedly acted as a dependable support, absorbing downward pressure. Yet, for a more durable upward shift, analysts at YES Securities believe the index must move above the 25,000 mark to reignite bullish momentum. “Without it, the upside remains capped,” they cautioned.

Nuvama, on its part, sees resistance emerging around 25,050, while support is expected at 24,150 in the near term. “Overall, while we do not foresee significant downside pressure beyond weakness towards 24,200, heightened volatility could make trading challenging for both sides,” the firm said. That said, if the index first approaches the 24,200 zone, Nuvama believes it could present an attractive entry point for bullish bets, with a protective stop loss of roughly 200 points.

Meanwhile, SBI Securities expects the 200-day exponential moving average (EMA) zone of 24,300–24,250 to serve as critical support. “Any sustained move below 24,250 will likely extend the correction towards 24,000. On the upside, the zone of 24,700–24,750 will act as a crucial hurdle for the index,” the firm highlighted.