Mphasis Ltd. Sees Sharp Open Interest Surge Amid Bearish Price Action

Open Interest and Volume Dynamics

On 19 Feb 2026, Mphasis recorded an open interest of 38,451 contracts, up from 33,628 contracts the previous day, marking an increase of 4,823 contracts or 14.34%. This rise in OI was accompanied by a futures volume of 19,611 contracts, indicating robust trading activity in the derivatives market. The futures segment alone accounted for a notional value of approximately ₹72,689 lakhs, while the options segment's notional value was substantially higher at ₹6,034 crores, culminating in a total derivatives market value exceeding ₹73,277 lakhs.

Despite this surge in derivatives interest, the underlying stock price of Mphasis declined by 1.82% on the day, closing near its intraday low of ₹2,386.20. The weighted average price of traded volumes skewed towards the lower end of the day’s price range, suggesting selling pressure. Furthermore, the stock has been on a two-day losing streak, falling nearly 2.93% over this period, underperforming its sector by 1.67% and the Sensex by 0.97%.

Market Positioning and Moving Averages

The technical landscape for Mphasis remains bearish, with the stock trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day. This persistent weakness in price action contrasts with the rising open interest, hinting at increased short positioning or hedging activity by institutional participants. The delivery volume on 18 Feb was 1.49 lakh shares, but this figure has plummeted by over 70% compared to the five-day average, indicating falling investor participation in the cash segment.

Liquidity remains adequate for sizeable trades, with the stock’s average traded value supporting a trade size of approximately ₹4.48 crore based on 2% of the five-day average traded value. This liquidity profile facilitates active derivatives trading, which may be attracting speculative or hedging flows despite the underlying weakness.

Interpreting the Open Interest Surge

The sharp increase in open interest amid falling prices typically suggests that new positions are being initiated rather than existing ones being closed. In Mphasis’s case, this could imply that market participants are either aggressively shorting the stock or establishing protective hedges through derivatives. The substantial notional value in options contracts further supports the notion of complex positioning strategies, possibly involving put buying or call writing to capitalise on anticipated downside or volatility.

Given Mphasis’s current Mojo Score of 44.0 and a downgrade from Hold to Sell on 1 Feb 2026, the market sentiment appears cautious. The company’s market cap stands at ₹45,596.32 crore, categorising it as a mid-cap stock, which often attracts both institutional and retail speculative interest in derivatives.

Sector and Broader Market Context

The Computers - Software & Consulting sector has shown relative resilience, with the sector index declining only 0.16% on the day compared to Mphasis’s 1.82% drop. This underperformance highlights company-specific challenges or negative sentiment impacting Mphasis more severely than its peers. The Sensex’s 0.85% decline further underscores a broadly cautious market environment, possibly influenced by macroeconomic factors or sector rotation.

Investors should note that Mphasis’s falling investor participation in the cash market, combined with rising derivatives activity, may indicate a shift towards more speculative or hedged trading strategies rather than outright accumulation. This divergence often precedes heightened volatility or directional moves, making it imperative to monitor open interest trends alongside price action closely.

Implications for Investors and Traders

For investors, the current scenario suggests caution. The downgrade to a Sell rating and the deteriorating technical indicators imply limited near-term upside. The rising open interest in derivatives, particularly with the stock trading below all major moving averages, signals that market participants may be positioning for further downside or volatility spikes.

Traders focusing on derivatives should consider the elevated notional values and volume patterns as signs of increased activity and potential price swings. The concentration of volume near the day’s low price and the decline in delivery volumes indicate that short-term momentum is bearish. However, the large open interest also means that any sudden reversal or short-covering rally could be sharp and swift.

Monitoring changes in open interest alongside price movements will be crucial in the coming sessions to gauge whether the market is building a sustained directional bet or merely hedging existing positions. Given the mid-cap status of Mphasis and its liquidity profile, the stock remains a viable candidate for active trading strategies, albeit with heightened risk.

Conclusion

Mphasis Ltd.’s recent surge in open interest amidst declining prices and weakening technicals paints a picture of a stock under pressure, with market participants increasingly engaging in derivatives to express bearish views or hedge exposures. The downgrade to Sell and the underperformance relative to sector and benchmark indices reinforce a cautious outlook. Investors and traders should remain vigilant, analysing open interest trends and volume patterns closely to anticipate potential directional moves and volatility in this mid-cap software consulting stock.

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