Mphasis Ltd Sees Sharp Open Interest Surge Amidst Weak Price Momentum

Open Interest and Volume Dynamics

The latest data reveals that Mphasis’s open interest (OI) in derivatives climbed from 34,177 contracts to 38,100, marking an increase of 3,923 contracts or 11.48% on a single trading day. This rise in OI was accompanied by a futures volume of 32,609 contracts, indicating robust trading activity. The combined futures and options value stood at approximately ₹85,065 lakhs, with futures contributing ₹83,787 lakhs and options an overwhelming ₹12,891.98 crores in notional value. The underlying stock price closed near ₹2,300, reflecting a 3% decline on the day.

Price Performance and Technical Context

Despite the surge in derivatives interest, Mphasis’s share price has been on a downward trajectory, underperforming its sector by 1.86% on the day and falling 6.69% over the past four consecutive sessions. The stock touched an intraday low of ₹2,293.9, down 3.37%, and is currently trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling sustained bearish momentum. This technical weakness is compounded by a sharp 39.1% drop in delivery volume to 2.5 lakh shares on 20 Feb compared to the five-day average, suggesting waning investor participation in the cash segment.

Market Positioning and Potential Directional Bets

The simultaneous rise in open interest and decline in price often points to increased short selling or hedging activity by institutional participants. Traders may be building bearish positions through futures and options, anticipating further downside or volatility in Mphasis shares. Alternatively, the elevated OI could reflect fresh long positions taken at lower strike prices in options, aiming to capitalise on potential rebounds, though the prevailing trend suggests the former scenario is more likely.

Given the stock’s mid-cap status with a market capitalisation of ₹43,840.27 crores and a Mojo Score of 44.0, the current Mojo Grade has been downgraded from Hold to Sell as of 1 Feb 2026. This downgrade aligns with the deteriorating technicals and weakening investor sentiment. The market cap grade of 2 further indicates moderate liquidity and trading interest, which is corroborated by the stock’s ability to handle trade sizes up to ₹2.64 crores based on 2% of the five-day average traded value.

Comparative Sector and Market Analysis

In contrast to Mphasis’s 3.14% decline on the day, the broader Computers - Software & Consulting sector fell by a milder 1.22%, while the Sensex managed a modest gain of 0.44%. This relative underperformance highlights the stock’s vulnerability amid sectoral headwinds. The sustained fall over four sessions and the breach of multiple moving averages suggest that Mphasis is currently out of favour with investors, possibly due to concerns over earnings growth, competitive pressures, or broader macroeconomic factors impacting the IT services industry.

Implications for Investors and Traders

The surge in open interest amidst falling prices is a cautionary signal for investors. It implies that market participants are either increasing bearish bets or hedging existing long exposures, anticipating further downside or volatility. For traders, this environment may present opportunities to capitalise on directional moves through futures and options strategies, but it also warrants heightened risk management given the stock’s recent volatility and declining liquidity in the cash segment.

Investors should closely monitor upcoming quarterly results, sectoral developments, and broader market cues to gauge whether the current derivatives activity translates into sustained price trends. The downgrade to a Sell rating by MarketsMOJO reflects the cautious stance warranted by the current data.

Outlook and Strategic Considerations

Given the current technical weakness and the elevated open interest, Mphasis appears to be at a critical juncture. The stock’s inability to hold above key moving averages and the consistent decline in delivery volumes suggest that institutional investors may be reducing exposure. Meanwhile, the derivatives market activity points to increased speculative or hedging positions, which could amplify volatility in the near term.

For long-term investors, it is prudent to await clearer signs of a trend reversal or fundamental improvement before increasing exposure. Traders, on the other hand, might consider strategies that benefit from volatility or directional moves, such as spreads or straddles, while maintaining strict stop-loss discipline.

In summary, the sharp rise in open interest amid falling prices and weakening volume participation signals a cautious market stance on Mphasis Ltd. The downgrade to a Sell rating by MarketsMOJO underscores the need for prudence, as the stock navigates a challenging technical and sentiment landscape.

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