Mphasis Ltd Sees Sharp Open Interest Surge Amid Bearish Price Action

Open Interest and Volume Dynamics

The latest data reveals that Mphasis’s open interest in futures and options contracts climbed from 21,630 to 24,758 contracts, an increase of 3,128 contracts or 14.46%. This rise in OI accompanied a daily traded volume of 17,290 contracts, indicating robust participation in the derivatives market. The futures segment alone accounted for a value of approximately ₹29,461.43 lakhs, while options contracts contributed an overwhelming ₹10,041.97 crores in notional value, underscoring the scale of speculative and hedging activity.

Such a pronounced increase in open interest typically suggests fresh positions being established rather than existing ones being squared off. In Mphasis’s case, this surge coincided with a notable price decline, hinting that new short positions or protective puts might be driving the market action.

Price Action and Moving Averages

On the trading day, Mphasis opened with a gap down of 2.19%, reflecting immediate bearish sentiment. The stock touched an intraday low of ₹2,615.10, marking a steep 7.24% drop from previous levels. The weighted average price for the day was closer to this low, indicating that most volume was transacted near the bottom end of the price range, a sign of selling pressure dominating the session.

Technically, Mphasis is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a sustained downtrend. This technical weakness aligns with the broader sector performance, where the IT - Software sector declined by 5.89% on the same day, further pressuring the stock.

Sector and Market Context

While the Sensex managed a modest gain of 0.17%, the IT sector’s sharp fall dragged Mphasis lower. The sector’s underperformance reflects concerns over global tech demand and margin pressures, which have weighed on mid-cap software companies. Mphasis, with a market capitalisation of ₹50,686.30 crores, is classified as a mid-cap stock and currently holds a Mojo Score of 44.0, graded as a Sell by MarketsMOJO as of 1 Feb 2026, downgraded from Hold. This downgrade reflects deteriorating fundamentals and weakening price momentum.

Investor participation remains elevated, with delivery volumes rising to 3.67 lakh shares on 3 Feb, a 49.59% increase over the five-day average. This suggests that despite the price weakness, investors are actively trading and possibly repositioning their portfolios amid the volatile environment.

Interpreting the Open Interest Surge: Directional Bets and Market Positioning

The 14.46% increase in open interest amid falling prices suggests that market participants are likely building bearish positions. This is consistent with the stock’s underperformance relative to its sector and the broader market. The elevated futures value of ₹29,461.43 lakhs and the massive options notional value indicate that traders are actively using derivatives to express negative views or hedge existing exposures.

Options data, while not detailed here, likely shows increased put buying or call selling, which would reinforce the bearish stance. The fact that the stock is trading below all major moving averages further supports the notion that technical traders are positioning for continued downside or at least cautious about upside risks.

Liquidity remains adequate, with the stock’s average traded value supporting trade sizes up to ₹2.52 crores without significant market impact. This liquidity facilitates active derivatives trading and allows institutional players to manoeuvre sizeable positions.

Valuation and Quality Assessment

Mphasis’s current Mojo Grade of Sell and a Market Cap Grade of 2 reflect concerns over valuation and quality metrics. The downgrade from Hold to Sell on 1 Feb 2026 signals a reassessment of the company’s growth prospects and risk profile. Investors should note that the stock’s recent price action and derivatives activity align with this negative outlook.

Given the sector headwinds and technical weakness, the risk-reward profile appears skewed towards caution. Investors holding Mphasis shares or derivatives should closely monitor open interest trends and volume patterns for signs of a potential reversal or further deterioration.

Outlook and Investor Considerations

In the near term, Mphasis faces significant resistance levels and a challenging sector environment. The open interest surge in derivatives suggests that traders are bracing for further volatility or downside. Investors should be wary of chasing the stock amid this bearish momentum and consider risk management strategies such as stop-loss orders or hedging through options.

Long-term investors may want to wait for signs of fundamental improvement or technical stabilisation before increasing exposure. The current Mojo Sell rating and the stock’s position below all major moving averages indicate that the downtrend is intact.

Monitoring delivery volumes and open interest changes in the coming sessions will be crucial to gauge whether the selling pressure is abating or intensifying. A sustained decline in open interest alongside price stabilisation could signal position unwinding and a potential base formation.

Overall, the derivatives market activity in Mphasis Ltd. provides valuable insights into market sentiment and positioning, highlighting the importance of integrating technical and fundamental analysis for informed investment decisions.

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