ITC Ltd Sees Sharp Open Interest Surge Amidst Declining Share Price and Bearish Market Sentiment

Open Interest and Volume Dynamics

The open interest (OI) in ITC Ltd. futures and options contracts rose sharply from 3,08,713 to 3,84,157 contracts, an increase of 75,444 contracts or 24.44% on 2 January 2026. This surge in OI was accompanied by a robust volume of 3,33,479 contracts traded, indicating heightened activity and fresh positions being established rather than mere unwinding of existing ones.

The total futures value stood at approximately ₹2,16,731 lakhs, while the options segment exhibited an astronomical notional value of ₹1,74,198 crores, underscoring the substantial derivatives market interest in ITC. The combined derivatives turnover reached ₹2,46,367 lakhs, reflecting strong liquidity and active participation from institutional and retail traders alike.

Price Action and Technical Weakness

On the price front, ITC’s stock closed at ₹348, hitting an intraday low of ₹345.25, marking a fresh 52-week low. The stock has been under pressure for two consecutive sessions, losing 13.67% over this period. The weighted average price of traded volumes clustered near the day’s low, signalling selling dominance throughout the session.

Technically, ITC is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — indicating a sustained downtrend. The sector to which ITC belongs, Cigarettes/Tobacco, also declined by 3.84% on the day, reflecting broader sectoral weakness that is weighing on the stock.

Investor Participation and Delivery Volumes

Notably, delivery volumes surged to 15.66 crore shares on 1 January 2026, a staggering 969.83% increase compared to the five-day average delivery volume. This spike in delivery volumes suggests that investors are increasingly taking physical delivery of shares, possibly indicating accumulation or repositioning at lower price levels despite the bearish price action.

Liquidity remains ample, with the stock’s traded value supporting a trade size of approximately ₹56.84 crore based on 2% of the five-day average traded value, ensuring that market participants can execute sizeable trades without significant price impact.

Market Positioning and Directional Bets

The sharp rise in open interest alongside falling prices typically points to fresh short positions being initiated, as traders anticipate further downside. The increase in OI by over 75,000 contracts suggests that bearish bets are being placed aggressively in the derivatives market. This is corroborated by the stock’s underperformance relative to the sector and the broader Sensex, which gained 0.32% on the same day.

However, the surge in delivery volumes indicates that some investors may be accumulating shares at these depressed levels, possibly expecting a medium-term recovery or valuing ITC’s strong market presence and cash flow generation capabilities. This dichotomy between derivatives positioning and cash market activity highlights a complex market sentiment where short-term traders are bearish while longer-term investors may be opportunistic buyers.

Mojo Score and Analyst Ratings

ITC Ltd. currently holds a Mojo Score of 46.0, categorised as a Sell rating, downgraded from Hold on 29 December 2025. The downgrade reflects deteriorating fundamentals and technical weakness, with the Market Cap Grade at 1, indicating limited upside potential relative to its large-cap peers. The day’s price decline of 3.86% aligns with the negative sentiment embedded in the Mojo grading system.

Given the stock’s current trajectory and derivatives market activity, investors should exercise caution. The combination of technical weakness, rising open interest on the downside, and sectoral headwinds suggests that ITC may face further pressure in the near term.

Sectoral and Broader Market Context

The Cigarettes/Tobacco sector’s decline of 3.84% on the day adds to the bearish backdrop for ITC. Regulatory pressures, rising excise duties, and shifting consumer preferences continue to challenge the sector’s growth prospects. ITC’s large market capitalisation of ₹4,55,991 crore places it among the top FMCG players, but its recent performance suggests that investors are reassessing its risk-reward profile amid these headwinds.

Compared to the Sensex’s modest gain, ITC’s underperformance highlights sector-specific challenges rather than broad market weakness. This divergence is critical for investors to consider when evaluating portfolio allocation and risk management strategies.

Outlook and Investor Considerations

In summary, the pronounced increase in open interest combined with falling prices and heavy volumes signals a bearish near-term outlook for ITC Ltd. Traders appear to be positioning for further downside, while some long-term investors may be selectively accumulating at lower levels. The stock’s technical indicators remain weak, and the downgrade in Mojo Grade to Sell reinforces the cautious stance.

Investors should monitor open interest trends closely, as any sudden unwinding or reversal in derivatives positioning could trigger volatility. Additionally, sectoral developments and regulatory announcements will be key drivers to watch in the coming weeks.

Given the current market dynamics, a prudent approach would be to reassess exposure to ITC and consider alternative FMCG stocks with stronger momentum and fundamentals.

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