Ahead of the Union Budget 2025, Nuvama Institutional Equities in its monthly rollover analysis said FIIs are heavily short in futures and have liquidated in cash, while high net-worth individuals (HNIs) remained cautious. It believes a broad-based recovery is unlikely, but stock-specific buying action may be seen in February series, which was almost nonexistent in January series. Sectors like banking may see buying on declines while IT may see short on rise, the brokerage said.
Nuvama likes private lenders such as HDFC Bank Ltd, Axis Bank Ltd and Kotak Mahindra Bank Ltd. It likes industrials such as Polycab India Ltd, Havells India Ltd and Siemens Ltd in industrials and Hero MotoCorp and Eicher Motors in auto space. The brokerage also has a likely for potential Nifty entrants Zomato Ltd and Jio Financial Services Ltd, it said.
"Indian equities are currently oversold, largely driven by a broad market sell-off. FII positioning is heavily skewed towards the short side, with 89 per cent shorts and only 11 per cent longs. Historically, short coverings can lead to a 2-3 per cent immediate rally, which is expected to positively impact FII-heavy sectors, particularly private financials," Nuvama said in its outlook for February F&O series.
Given their attractive valuations, domestic flows are also favouring this sector, it said adding that Nifty should ideally head till the 23,750 level.
"Our top picks on the long side are Axis Bank, HDFC Bank, and Kotak Bank, while IndusInd Bank Ltd can be used as a hedge, alongside other fundamentally weak banks. We also see potential in Industrials and related stocks like Polycab, Siemens, and Havells. Also auto names like – Hero MotoCorp Long and Eicher can be a relative short. Also we find IT Sector as top Short bet," it said.
Overall, Nifty futures rollovers stood at 81 per cent against 77 per cent in the last three F&O series. Nifty futures will start the February series at higher open interest base of Rs 42,100 crore (18.1 million shares) against OI of Rs 28,700 crore (12.1 million shares) seen at the start of January series.
The market-wide futures open interest at the start of February series stands at Rs 4.64 lakh crore compared with Rs 4.44 lakh crore at the start of January series. Market-wide rollovers stood at 89 per cent, in line with the three-month average of 89 per cent.
Stock futures rollovers stood at 90 per cent, lower than the average rollovers of last three series at 92 per cent.
"In terms of Nifty 50 potential entrants, Zomato and Jio Financials are worth considering for long trades with a 5 per cent stop loss, as these stocks are heavily beaten down and have low ownership from a pre-positioning standpoint. However, we remain cautious on the SMID (Small & Midcap) space, as it will likely remain a market under-performer unless there's stronger participation from HNIs," it said.