Eternal Ltd Sees Sharp Open Interest Surge Amidst Prolonged Downtrend

Open Interest and Volume Dynamics

The latest data reveals that Eternal Ltd’s open interest (OI) in derivatives rose sharply from 1,53,296 contracts to 1,78,796 contracts, an increase of 25,500 contracts or 16.63%. This spike in OI coincides with a substantial trading volume of 1,53,051 contracts, indicating robust participation from traders and investors. The futures segment alone accounted for a value of approximately ₹2,46,444 lakhs, while the options segment’s notional value soared to an extraordinary ₹74,328 crore, culminating in a total derivatives value of ₹2,62,302 lakhs.

Such a pronounced rise in open interest alongside high volume typically suggests fresh positions are being established rather than existing ones being squared off. This could imply that market participants are either hedging aggressively or speculating on a directional move in Eternal Ltd’s stock price.

Price Action and Technical Context

Despite the surge in derivatives activity, Eternal Ltd’s underlying equity has underperformed notably. The stock opened with a gap down of 2.99% and touched an intraday low of ₹251.8, marking a 6.04% decline on the day. It has now fallen for six consecutive sessions, cumulatively losing 11.39% in value. The weighted average price indicates that the bulk of volume traded closer to the day’s low, signalling selling pressure.

Technically, Eternal Ltd is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — underscoring a bearish trend. This technical weakness is compounded by the stock’s underperformance relative to its sector, which itself has declined by 4.6% in the same timeframe. The broader Sensex has been less affected, falling only 1.16% on the day, highlighting the stock’s relative weakness.

Market Positioning and Investor Sentiment

The sharp increase in open interest amid falling prices suggests that traders may be building short positions or hedging existing long exposures. The 16.6% rise in OI, coupled with a 63.4% jump in delivery volume to 2.39 crore shares on 23 Feb compared to the five-day average, indicates rising investor participation but with a bearish bias.

Given Eternal Ltd’s large market capitalisation of ₹2,44,781 crore, the stock remains liquid enough to accommodate sizeable trades, with an estimated tradable value of ₹17.28 crore based on 2% of the five-day average traded value. This liquidity supports active derivatives trading and allows institutional investors to manoeuvre sizeable positions efficiently.

Mojo Score and Analyst Ratings

Eternal Ltd currently holds a Mojo Score of 31.0, categorised under a 'Sell' grade, a downgrade from its previous 'Hold' rating as of 23 Oct 2025. This downgrade reflects deteriorating fundamentals and technical indicators, signalling caution for investors. The company’s market cap grade is 1, indicating its status as a large-cap stock, but the negative momentum and weak price action have weighed heavily on its outlook.

Analysts note that the stock’s persistent decline and the surge in open interest may be indicative of increased bearish sentiment or hedging activity by institutional players. The combination of technical weakness, negative price momentum, and rising derivatives activity suggests that investors are positioning for further downside or volatility in the near term.

Sectoral and Market Context

The E-Retail and E-Commerce sector, to which Eternal Ltd belongs, has faced headwinds recently, with the IT-Software sector falling by 4.6% on the day. Eternal Ltd’s underperformance relative to both its sector and the broader market highlights company-specific challenges or investor concerns. The stock’s 5.18% decline on the day further emphasises the pressure it faces amid a cautious market environment.

Investors should also consider the broader macroeconomic factors impacting the sector, including changing consumer behaviour, regulatory developments, and competitive dynamics, which may be influencing the derivatives market positioning and open interest trends.

Implications for Investors

The surge in open interest amid a declining price trend suggests that investors should exercise caution with Eternal Ltd. The derivatives market activity points to increased speculation or hedging, which often precedes heightened volatility. Investors holding long positions may consider protective strategies such as options hedging, while those looking to initiate positions should await clearer signs of trend reversal or fundamental improvement.

Given the stock’s current technical weakness and negative momentum, alongside a downgrade in its Mojo Grade, the risk-reward profile appears unfavourable in the short term. Monitoring open interest trends and volume patterns will be crucial to gauge shifts in market sentiment and potential directional bets.

Conclusion

Eternal Ltd’s recent open interest surge in derivatives amid a sustained price decline highlights a complex market positioning scenario. While increased participation signals investor interest, the prevailing bearish technical setup and downgrade in analyst ratings suggest caution. Market participants should closely track evolving volume and open interest data alongside sectoral trends to make informed decisions on this large-cap E-Retail stock.

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